24/7 Wall St.

Over the last three months, shares of Nvidia (NASDAQ: NVDA) have dropped almost 40%. Chipmakers AMD (NYSE: AMD) and Intel (NASDAQ: INTC) have traded fairly flat over the same period.

AMD has been heavily punished over the last two years, so it makes some sense that its shares are not falling, but Nvidia’s business has a history of has doing well because it operates in the highly profitable graphics chip segment of the market. Slowing PC sales have undermined all of the industry’s suppliers, but the fall in NVDA shares is breathtaking.

According to the AP,  over the last quarter Nvidia’s shares were the most volatile in the S&P 500 information technology sector, 70% more volatile than the average stock in the segment.

Nvidia was hit by an old truck know as expenses. While net income was up 57% in its last quarter and sales moved up above expectations, according to MarketWatch expenses rose 16%. The company forecast another jump in costs in the current quarter.  No one was surprised when the CFO left the company.

The economy is bad enough now that companies with any increase in costs above expectations are likely to be torn down by Wall St. even those going through incredible growth spurts.

If Nvidia does not show a marked improvement in cost control in the next quarter, it will be a very long one for its shareholders.

Douglas A. McIntyre