(Bloomberg) — Traders are scouring charts for clues as to where the pain will end after Nvidia Inc.’s (NVDA) market capitalization fell by a record $279 billion on Tuesday.
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For Jay Woods, chief global strategist at Freedom Capital Markets, $100 a share is a key level to watch, near last month’s lowest closing price. Nvidia shares fell to around $106 at the start of trading on Tuesday.
“I don’t want to see the stock make a new closing low below the August low because that would suggest, at least technically, that things have changed,” Woods said. “I think we’ll see some buying around $100 and then we’ll see a sideways move.”
The latest offering (shares fell 14% in three trading days) was triggered by the chipmaker’s disappointing financial results. Two research reports released on Tuesday sounded the alarm on companies’ spending on artificial intelligence, further increasing investor anxiety. More bad news came after the market closed, when Bloomberg reported that Nvidia had received a subpoena as part of the U.S. Department of Justice’s antitrust investigation.
The problem for Nvidia stock is that there aren’t many positive catalysts on the calendar, said Michael Kirkbride, a portfolio manager at Evercore Wealth Management.
“We’re in a bit of a vacuum right now. Earnings are out, there’s a lot of economic data coming out this month, and there’s a lot of attention leading up to that,” he said. “When trading gets stuck, it becomes a very short-term, pre-emptive market in nature.”
Nvidia’s slump, which dragged down global chipmakers and risk assets, came after a tumultuous few months for the AI market darling. Tuesday’s drop marked the seventh time in two months that the company’s shares have fallen more than 6%. A 30-day volatility gauge for Nvidia shares also hit its highest level since mid-2022, according to data compiled by Bloomberg.
Investors will look back to the last month to see if Nvidia shares could be bottoming. The company entered a correction in August, with shares ultimately falling 27% from their June peak, before recovering to within 5% of their all-time high. The reasons for that decline — macroeconomic uncertainty and new concerns about the sustainability of the company’s huge investments in AI — are now recurring.
A research report published Tuesday by JPMorgan Asset Management and BlackRock Investment Institute focused on concerns that Nvidia’s largest customers are seeing relatively little return on the tens of billions of dollars they have spent.
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Michael Cembalest, chairman of markets and investment strategy at JPAM, wrote that to justify big spending on the technology, there will need to be broader demand from corporate customers over the next 12 to 18 months, not just from clients like OpenAI that are training new AI models.
Meanwhile, Jean Boivin, head of the BlackRock Investment Institute, said investors needed to be patient because building data centers and adding processing capacity typically “takes years, not quarters.”
Still, Boivin said investors should remain overweight AI stocks because the recent sell-off in the technology sector “suggests there is room to restructure holdings.”
Freedom Capital’s Woods and EvercoreWM’s Kirkbride also remain positive on Nvidia in the long term.
While Woods sees no reason to panic about this week’s share price drop, Kirkbride said there’s nothing fundamentally wrong with the company or its earnings reports.
“We remain long-term holders and have not heard anything that would change the situation with respect to Nvidia, its customers or their spending plans,” Kirkbride said.
“We’re the buyers here.”
Today’s Tech Charts
Nvidia is the third-largest stock in the S&P 500, accounting for just 6.1% of the index, but it has been a major driver of the index this year. The chipmaker’s shares have been dragging the broader market since January, and this week’s sharp drop doesn’t bode well for the index.
Top Technology News
The US Department of Justice has sent subpoenas to chipmaker Nvidia and other companies seeking evidence that the company has violated antitrust laws, intensifying its investigation into a leading provider of AI processors.
OpenAI Chief Executive Sam Altman’s plans for building the machines and systems needed for artificial intelligence at scale are becoming clearer, starting with an effort in U.S. states costing tens of billions of dollars, according to people familiar with the matter.
Nvidia has participated in a more than $100 million funding round for Tokyo startup Sakana AI, one of the largest investments a U.S. chipmaker has made in Japan’s emerging AI sector to date.
Swedish telecoms company Telia plans to cut 3,000 jobs, or about 15 percent of its workforce, as it grapples with loss-making operations and faces growing competition from rivals in key markets.
Sony Group is ceasing development of a major online game it released just two weeks ago, marking one of the biggest setbacks for its PlayStation business.
Earnings due on Wednesday
—With assistance from Henry Wren and Michael Musica.
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