Why Nvidia Stock Jumped Monday

What happened

Shares of the semiconductor giant Nvidia (NVDA 2.43% ) surged in Monday afternoon trading, ultimately ending the day up 2.4%.

There’s no obvious news on the wires regarding Nvidia per se today, but there has been some news affecting semiconductor stocks in general.

Image source: Getty Images.

So what

Specifically, over the weekend, Focus Taiwan reported that a temporary shutdown of 3M’s semiconductor cooling plant in Zwijndrecht, Belgium, first announced in early March, “could impact major impact on the global semiconductor industry”.

Friday, BusinessKorea confirmed that this plant, which “accounts for 80% of the world’s total production of semiconductor coolant…has been closed indefinitely under tightened local environmental regulations”. Semiconductor coolant isn’t something investors think about much. But it is used in microchip production during the etching process, so a supply disruption could affect customers like Samsung, SK Hynix, Intel and Taiwan semiconductor (TSM 1.95% ) — a subcontractor for Nvidia chips.

Now what

According to Focus Taiwan, 3M has between one and three months worth of coolant on hand. But once that runs out – and assuming the Belgian factory doesn’t get back up and running before then – it could throw another wrench into the semiconductor chip supply chain, restricting the supply and driving up prices.

Whether that ends up meaning higher entry costs for Nvidia, limited supplies to the extent that it affects the company’s ability to make sales, or prices kept high remains to be seen. As for today, investors seem to be betting on the latter, as another factor must now be factored into the prospects of solving the global semiconductor shortage that has already lasted for years.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end consulting service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.

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