A recent downturn in Nvidia Corp.’s shares has left market analysts focused on technical indicators to assess the potential for further declines.
The prolonged selloff of Nvidia shares has caught the attention of market technicians, who are closely monitoring the stock’s 200-day moving average. This key momentum indicator, breached in January for the first time in over two years, is seen as a gauge for the company’s long-term performance. Technical strategist Todd Sohn noted the difficulty in maintaining a bullish stance as the moving average trends downward.
Sohn pinpointed $113 per share as a critical level, mirroring the lows reached in February. Additional analysis by Rick Bensignor suggests possible support levels ranging from $110 to $107, with a minimum downside target of $103. Bensignor also highlighted the potential for further declines to around $90 if current supports fail.
The decline in Nvidia stocks is happening alongside a broader market shift affecting major tech companies, including those grouped under the ‘Magnificent Seven.’ These tech giants have entered correction territory, marked by declines exceeding 10% from previous peaks. Uncertainty surrounding President Trump’s tariffs, which could significantly impact tech firms with ties to China, compounds these challenges.
Notably, Nvidia is responsible for a significant part of the Nasdaq’s year-to-date decline, followed by Tesla Inc. and Broadcom Inc. These companies are also nearing their respective 200-day moving averages, signaling persistent market pressure.
Market experts like Buff Dormeier express concerns about Nvidia’s momentum, pointing to a flattening 200-day trendline as an indicator of weakening strength. Despite its status as a key player in artificial intelligence (AI) development, investor sentiment remains cautious amid broader market pressures.
Nvidia’s valuation has dipped to its lowest forward earnings multiple in over a year, now comparable to that of the Nasdaq and S&P 500. The tech giant’s declining valuation is unexpected, especially as significant investments in AI are anticipated moving forward.
Analysts at Bernstein and Citigroup caution against premature conclusions about Nvidia’s AI trajectory. They suggest waiting for resolutions on AI restrictions and tariff impacts before making bullish predictions. Despite attractive valuations, market pressures remain a pivotal factor, warranting investor patience.
Although Nvidia’s lowered valuation provides an attractive entry point for some investors, the broader market uncertainty, particularly regarding tariffs and AI, necessitates a cautious approach. Analysts advise monitoring these market dynamics closely before making investment decisions.
