NVIDIA plunges, is it a good time to buy the dip?
NVIDIA's sharp decline triggers a new round of market panic. Some analysts are optimistic about the strong demand for AI, viewing each sell-off as a buying opportunity. However, ahead of the "September curse" and this week's non-farm payroll data bombshell, some investors will proceed cautiously
Overnight NVIDIA Plunge triggered a sell-off in chip stocks, and a new round of market panic seems to be sweeping back.
In September, while some traders are considering whether this is a good "buying the dip" opportunity, for investors who have benefited from the significant rise in chip stocks in the past few years, this is a critical moment.
Some analysts believe that every sell-off is a buying opportunity, and concerns about the outlook for AI demand have been exaggerated. However, some analysts point out that the stock market's "September curse" combined with the upcoming non-farm payroll data makes the market extremely unstable, and some traders are not willing to take risks for the time being.
NVIDIA's Plunge Raises Concerns, Is "Buying the Dip" Feasible?
Overnight, NVIDIA plummeted by 9.5%, with a market value evaporating by 279 billion yuan, marking the largest single-day market value drop in history. Since the release of its financial report last week, NVIDIA's stock price has fallen by over 14% cumulatively. The company's performance often sets the tone for the chip and AI industry. Under the impact of NVIDIA, chip AI stocks such as SK Hynix, Tokyo Electron, and TSMC have experienced widespread declines.
Analysis points out that NVIDIA's recent plunge is due to market concerns about its financial report, believing that the company is overvalued and its revenue growth guidance is slowing down. Adding to the woes, NVIDIA received a subpoena from the U.S. Department of Justice, intensifying antitrust regulatory risks. At the same time, weak chip sales data also dampen the industry outlook. UBS analyst Timothy Arcuri analyzed that chip sales in June and July dropped by 11.1%.
Panic is spreading, with the VIX panic index surging on Tuesday, and concerns about high market volatility persist. The current "September curse" is lingering, as September is the only month in the U.S. stock market with a negative average return over the past century. Furthermore, this Friday's U.S. non-farm payroll report is expected to cause a market upheaval.
Some traders are choosing to act cautiously. Charu Chanana, Head of Forex Strategy in Singapore, stated:
With the "curse of September" and the memory of the sharp drop in early August after the employment data was released, and another (non-farm) employment report to be released this week, traders are not willing to take risks at the moment. I will also be quite cautious.
A global asset management analyst at UBS expressed that some investors have begun to question whether the investment returns on tech stocks like NVIDIA can be realized:
Investors are now starting to question whether investment returns can be realized. When they see some macroeconomic data not so strong, they are a bit nervous. So, there is a question now: whether to continue the music and dance, whether the investment in cloud computing (enthusiasm) is still there.
However, there are still many voices supporting NVIDIA and AI chip stocks, believing that this is a good buying opportunity. Jung In Yun, CEO of Fibonacci Asset Management in Singapore, said:
Although we expect the stock market to experience a peak in volatility in the near future, we still believe that every sell-off is a buying opportunity. We expect Asian (chip) stocks to rise rapidly again. We believe concerns about the peak demand for AI have been exaggerated, and the demand for AI and industry infrastructure is likely to remain strong in the first half of next year. **
He added that investors should "look for stocks related to artificial intelligence that have not experienced significant increases yet."
After Nvidia faced selling pressure, Wedbush Securities analyst Daniel Ives came out in support of Nvidia:
Stepping back, Nvidia has changed the landscape of technology and the world as its GPU has become the new oil and gold in the IT field, driving the AI revolution and being the only choice currently.
Piper Sandler analyst Harsh Kumar acknowledged that Nvidia's performance report did not fully meet investors' expectations, but he remains optimistic about Nvidia. He pointed out that there is strong demand in the market for Nvidia's Hopper chips, which is expected to further grow in the second half of the fiscal year. At the same time, revenue from Blackwell chips is basically on track