Why Nvidia, Amazon and Apple shares plummeted Tuesday morning

What happened

If there was only one slogan that defines 2022, it would be inflation. Consumers and investors alike have been looking for signs of an easing in rising prices.

When the government’s latest inflation report arrived on Tuesday morning, it revealed that while prices weren’t rising as quickly as before, the news was still worse than expected, triggering a sell-off on Wall Street.

With that as a background, actions of Nvidia (NVDA -9.47%) has dropped to 7.8%, Amazon (AMZN -7.06%) collapsed up to 6%, e Apple (AAPL -5.87%) it slipped up to 4.5%. At 12:45 PM ET, the trio was still trading lower, at 7.5%, 5.1%, and 4.2%, respectively.

To be clear, there was little in the way of company-specific news pushing these tech stocks down and what was found was decidedly positive. This suggests that investors were hyper-focused on macroeconomic data and what it meant for the future.

So

The monthly report from the US Bureau of Labor Statistics exposed the state of inflation during the month of August and things went even worse than many expected. The consumer price index (CPI), the government’s most followed measure of inflation, rose 0.1% over the month and 8.3% year-over-year.

To put this number in context, it is less than the 8.5% where prices increased in July. Unfortunately, it was even worse than the 8.1% forecast issued by economists. Core data, which eliminates highly volatile food and energy prices, still rose a paltry 6.3% in the previous 12 months.

If there was a bright side to the murky inflation data, it was that energy prices continued to ease on their recent highs, down 5% for the month. The biggest contributor to the decline was the drop in prices at the pump, as the gasoline index fell a hefty 10.6%.

The declines were more than offset by the increase in many basic necessities, including higher food prices, which saw an 11.4% year-over-year increase, the largest annual increase since 1979.

And now

Persistent inflation is weighing on investor sentiment, but even though these grim macro data have put them on hold, there are actually some firm-specific positive data that suggests investors should actually consider purchase these stocks.

Reports suggest that Nvidia and Taiwan semiconductor manufacturing they are working on a solution that would cascade multiple graphics processing units (GPUs) in a new way, which would be implemented for artificial intelligence (AI) uses. This could help fuel Nvidia’s sales as the company has increasingly focused on technology used in cloud computing, data centers and artificial intelligence, which has quickly become one of the company’s biggest growth drivers.

In Apple’s case, early presale data for the iPhone 14 suggests strong demand. Over the past couple of days, various analysts who have been monitoring the data have reported that wait times for the iconic device are increasing. History suggests that longer shipping times are related to high demand.

Well-known Apple follower Evercore ISI analyst Amit Daryanani joined the chorus on Tuesday, noting that delivery times are long, particularly for the iPhone 14 Pro, Pro Max and Plus models, according to The Fly. The data suggests that consumers are opting for these more expensive models, which could have a substantially positive impact on the average selling price (ASP) of iPhones and Apple’s margins.

For its part, Amazon has announced the debut of the latest model of its Kindle e-reader. The entry-level model, which the company calls “the lightest and most compact,” comes with numerous upgrades, providing an enticing alternative for users looking to join the digital reading crowd or replace an existing e-reader.

Electronic devices are only a small part of Amazon’s business, so it certainly won’t move the needle. That said, it helps make the Amazon ecosystem stickier by attracting new customers and holding on to existing ones.

Faced with the ongoing Nasdaq bear market, shares of Nvidia, Amazon and Apple are currently trading 60%, 30% and 14% lower than their respective highs. Additionally, these industry leaders are currently selling at 10, 6 and 2 times the sales of the next few years, respectively, each close to the lowest valuations in recent years. Given that they dominate their respective sectors and have a long track record of overcoming macroeconomic and other challenges, this could be a great opportunity to buy shares of these iconic companies at a discount.

John Mackey, CEO of Whole Foods Market, a subsidiary of Amazon, is a board member of The Motley Fool. Danny Vena has positions in Amazon, Apple and Nvidia. The Motley Fool has positions and recommends Amazon, Apple, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends the following options: March 2023 $ 120 long calls on Apple and March 2023 $ 130 short calls on Apple. The Motley Fool has a disclosure policy.

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