"The bottom-fishing army" is ready, is NVIDIA going straight from the ICU to the KTV?

According to the financial news app Zhitong Finance, NVIDIA (NVDA.US), the AI chip leader dubbed "the most important stock on Earth" by Wall Street giant Goldman Sachs, saw its total market value evaporate by about $279 billion during Tuesday's U.S. trading session. This triggered a sell-off wave in the chip sector and even the entire U.S. tech stock market, with Asian chip stocks also suffering losses and experiencing a sharp decline in Wednesday's Asian session. However, the stock market bottom-fishing troops who believe in "buying on dips" seem to be looking for a good opportunity to bottom out chip stocks like NVIDIA that benefit from the AI boom. Some analysts are also betting that the battered chip stocks will see a wave of buying on dips.

Just four weeks after the global investors fled risk assets under the shadow of "Black Monday," NVIDIA, the chip giant that once topped the list of "the world's highest market cap listed companies," has triggered another "sell-off wave in the U.S. stock market." NVIDIA's stock price fell nearly 10% in regular U.S. trading, with a market value evaporating by $279 billion, marking the largest single-day market value loss in U.S. stock history. If we include the after-hours drop of up to 2%, its market value has cumulatively evaporated slightly over $300 billion, even surpassing the combined market value of U.S. chip giants AMD (AMD.US) and Intel (INTC.US).

For the U.S. stock market, September has been a turbulent month in history. The "September curse" has long haunted U.S. stock investors - since 1950, the S&P 500 Index and the Dow Jones Index have shown the most significant declines in September. However, this time the dismal start of the U.S. stock market in September has other substantial reasons.

Concerns about Asian economic growth have shaken the commodity markets from oil to copper. The latest U.S. manufacturing data has been very weak, but the data shows an increase in payment prices, which is a potentially worrying sign for inflation hawks. The market fears that the Fed's rate cut may not reach the widely expected 100 basis points. In addition, weak economic data, not optimistic financial reports from tech giants, and their massive AI spending suggest that the promise of reshaping global economic growth with artificial intelligence has yet to be realized, and the prospect of "AI monetization" seems increasingly pessimistic. These latest signals have played a crucial catalytic role in the massive collapse of the U.S. stock market triggered by chip stocks, making it difficult to justify the high valuations of chip stocks and the entire U.S. stock market.

In the Asian stock market, top Asian chip companies such as SK Hynix Inc., TSMC, Tokyo Electron, and Advantest suffered significant declines amid the global stock market downturn, bringing a "tightening moment" to investors who have benefited from the surge in chip stocks in recent years.

The VIX index, known as the "fear index" on Wall Street, surged rapidly on Tuesday. However, there may be more potential sources of financial market volatility this week. This includes the U.S. employment report and unemployment rate data to be released on Friday. Investors will closely monitor this report, fearing a slowdown in the U.S. economy or even an increase in "recession expectations," which could have a chain negative effect on NVIDIA's stock price, as well as the stock prices of NVIDIA's chip suppliers in Asia and more Asian chip giants Bottom-fishing funds may pour into chip stocks

However, looking at the most popular investor forums on Reddit and social media platform X (formerly known as Twitter), the "YOLO" force - a group of aggressive investors who adhere to the investment motto of "You Only Live Once" and are keen on betting heavily or buying high-leverage options to bet on a short-term rebound of a certain stock, as well as the broader "bottom-fishing force," seem to have prepared sufficient ammunition to buy low on chip stocks that have suffered heavy losses in their stock prices recently.

On Wall Street, the sentiment of "buying on dips" is exceptionally strong, especially as Wall Street's bullish investors believe that this round of correction has squeezed out the majority of the "AI bubble," and tech companies that can continue to profit from the AI wave are expected to enter a new round of "major uptrend," such as NVIDIA, AMD, TSMC, Intel, and Broadcom, among other popular chip stocks. Chips are an indispensable core infrastructure for popular generative AI tools like ChatGPT, making these popular chip stocks the biggest winners of the AI boom.

Analysts from major banks such as Bank of America and Morgan Stanley remain optimistic about NVIDIA's stock price trend, and they are calling out that the opportunity to "buy on dips" has arrived. Among them, Bank of America analyst Vivek Arya recently reiterated his "buy" rating on NVIDIA, calling it the "best industry choice," stating that the decline in NVIDIA's stock price provides a good entry point, and has raised NVIDIA's target price from $150 to $165, compared to NVIDIA's closing price of $108 on Tuesday.

The trend of chip industry recovery led by AI chips is becoming increasingly clear. Data released by the Semiconductor Industry Association (SIA) in the United States recently shows that the total global semiconductor industry sales in the second quarter of 2024 reached a high of $149.9 billion, an 18.3% increase from the second quarter of 2023, and a 6.5% increase from the already strong first quarter of 2024. Global semiconductor industry sales in July reached $51.3 billion, an 18.7% increase from July 2023, and a 2.7% increase from June 2024's $50 billion.

Research firm Gartner predicts that the development trend of generative AI and large language models (LLM) will fully drive the deployment of high-performance servers based on AI chips in data centers. The firm expects the total global revenue of AI chips to reach approximately $71 billion in 2024, a significant increase of 33% from 2023, and is expected to reach $92 billion in 2025 Here are some key views from institutional investors and analysts:

Jung In Yun, CEO of Fibonacci Asset Management Global Pte. in Singapore, said: "Although we expect volatility to soar again in the near future, we still believe that every sell-off is a buying opportunity. In this regard, we expect Asian stock markets to rise rapidly again." He emphasized: "We believe that concerns about the demand for artificial intelligence have been greatly exaggerated, and we may see strong demand for AI applications and their related infrastructure hardware continue to be strong in the first half of next year."

"Investors should look for stocks that are closely related to the AI trend but have not enjoyed a strong rally like NVIDIA, such as the Korean chip giant Samsung Electronics," Yun added.

Andrew Jackson, a strategist at Ortus Advisors Pte. in Singapore, said: "It feels a bit like the teacup storm after August, we won't see a panic sell-off like last time." The strategist added that he would choose to buy Asian chip stocks on dips, such as Micronics Japan Co. and Advantest.

Charu Chanana, Head of Forex Strategy at Shengbao Bank in Singapore, said: "The curse of September and the memory of sell-offs that occurred after the early August non-farm payrolls report are happening simultaneously. There is also a heavyweight employment report to be released this week, so traders are currently avoiding risks," she emphasized. "I would choose a relatively cautious approach here."

Randy Abrams, a researcher at UBS Global Asset Management, said: "Investors are now starting to question whether the returns on AI investments are optimistic. When they see some macro data not so strong, they seem a bit nervous. So, one question is whether the music will continue to play, and whether the strong AI hardware spending by cloud computing giants will continue to exist."

"Weak data is driving volatility in AI stocks, but what we see from the supply chain and mega-enterprises is that they will continue their strong pace of AI spending, which is why investors a few weeks ago, and possibly immediately, may choose a buy-on-dip strategy."

Dayeon Hong, Multi-Asset Portfolio Manager at Shinhan Asset Management in Seoul, said: "After a sharp decline in the stock market in August, there was a rapid rebound, so what we are seeing today is just a reversal of part of the rebound." "As market volatility may continue to increase on Friday, investors are taking a defensive stance ahead of time, which seems predictable."

Kohei Onishi, Senior Investment Strategist at Mitsubishi UFJ Morgan Stanley Securities in Tokyo, said: "The decline in Asian stock markets today is just a reaction to the sharp drop in the New York stock market overnight. Given the long-term strong rise of the US stock market, this scale of decline is not uncommon." "Ahead of the Federal Open Market Committee meeting on September 17-18, we may continue to see market volatility, and the market may experience significant fluctuations this month However, once the uncertainty that has swept the market recently is eliminated, we may see a significant rebound in stock prices by the end of the year."