Nvidia Corporation NVDA
shares are starting to challenge investors’ confidence as recent bouts of high volatility have clouded its immediate future.
Friday witnessed a whirlwind of emotions for shareholders. The stock surged 2.7% at the opening bell, escalating to a remarkable 5.1% peak above the opening price, hitting a record high of $974.
However, the narrative took a sharp turn later in the day. A sudden reversal in momentum saw the stock plummet to a daily low of $865.06, marking an intense 11.2% swing from peak to trough.
Closing the session at $875.28, Nvidia shares posted a 5.6% decline from the preceding day’s close.
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Challenges Faced by Key Indicators
The swift ascent of the stock has left vital indicators like the 50-day moving average trailing behind. The last time the share price retested the 50-day moving average (DMA) was on Feb. 16. Following a $726.58 close in the previous session, the stock endured a 7.1% plunge over the next three sessions, resting at $674.72, still a significant distance from the 50 DMA.
Presently, the 50 DMA stands around $661, marking a considerable retrace for the stock if a pullback ensues.
Could Nvidia, and potentially the broader market, be on the cusp of a correction? Historical data indicates that market corrections, defined by a minimum 10% decline from peak levels, typically occur roughly once every 16 months.
While the last market correction unfolded between July and October 2023, the broader market, represented by the S&P 500, has surged by 25% since then. In contrast, Nvidia stock has significantly outshined the market index, doubling in value over the same period as reported by Benzinga recently.
Anticipating Institutional Investor Concerns
Cathie Wood, CEO of ARK Investment Management, articulated concerns in Bloomberg Businessweek about a plausible correction in the semiconductor sector.
“The one place we could see a correction — and it’s just a correction, we’re not calling it the end of this at all — is in the chip space,” she remarked.
Echoing these sentiments, Jeff Kilberg, founder of KKM Financial, cautioned on CNBC, suggesting, “Monday could be a rude awakening.” As of the latest data on Monday, Nvidia shares were trading 0.7% lower at $869.00.
On Friday, the semiconductor market witnessed broader repercussions as Nvidia encountered a downturn.
Broadcom Inc. AVGO, following its quarterly earnings release post Thursday’s market close, triggered a ripple effect. Though the company exceeded Wall Street expectations in earnings and revenues, the lack of immediate visibility into the near-term outlook disappointed investors anticipating robust future earnings.
Consequently, Broadcom shares witnessed a 7% decline on Friday. Other chip stocks like Intel Corp INTC slid 4.6%, and ON Semiconductor Corp ON fell 4.8%.
The VanEck Semiconductor ETF SMH, which holds 27% of its portfolio in Nvidia, observed a nearly 4% decline on Friday and was down 1.5% at the time of publication on Monday.
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