Be cautious! The "most handsome boy" in the US stock market, Nvidia, has temporarily entered a technical adjustment zone
NVIDIA's stock price has recently shown weakness, dropping more than 10% from its previous all-time high and entering a technical adjustment zone. Competitors like Intel have launched new artificial intelligence chips, while Google has also introduced its own new AI chips, posing a challenge to NVIDIA. Despite some analysts giving a neutral rating, analysts at Morgan Stanley believe NVIDIA is capable of benefiting from the massive investments by cloud providers and have raised their target price to $1000. Although NVIDIA outperformed the broader U.S. stock market this week, as a key driver of the U.S. stock market's rise since the beginning of the year, caution is still needed as it enters a technical adjustment zone
Chip manufacturing giant NVIDIA's stock price has recently shown weakness. As of this Tuesday, it has fallen by over 10% from its closing historical high of $950 on March 25, entering a "technical adjustment zone." If calculated based on intraday levels, the intraday low of $830 on this Tuesday is nearly 15% lower than the intraday historical high of $974 on March 8.
The main reasons for the significant decline in NVIDIA's stock price over the past two weeks can be attributed to:
- NVIDIA was the biggest beneficiary of the AI boom that erupted in March last year, with its stock price skyrocketing. Profit-taking by investors is certainly one of the reasons.
- On Tuesday, NVIDIA's competitor Intel launched a new artificial intelligence chip called Gaudi 3, aimed at supporting large language models. In addition, Google's parent company Alphabet also introduced its own new AI chip. NVIDIA's stock price experienced a rare drop of nearly 5% that day.
Analysts at D.A. Davidson stated in their latest research report:
Although NVIDIA is expected to achieve brilliant performance in 2024, and possibly even in 2025, we still believe that by 2026, recent trends will lead to significant cyclical downturn.
The shrinking AI models, more stable demand growth, mature massive investments, and increased reliance of major customers on their own chips are not good signs for NVIDIA in the coming years.
D.A. Davidson maintains a neutral rating on NVIDIA.
However, analysts at Morgan Stanley defended NVIDIA's recent weakness and raised their target price to $1000, citing NVIDIA's ability to benefit from the massive investments in artificial intelligence made by the largest cloud providers.
On Wednesday, NVIDIA outperformed the broader U.S. market. U.S. CPI data continued to show signs of inflation since the beginning of the year, with U.S. stocks and bonds falling across the board. However, NVIDIA opened lower in the morning but turned higher, closing up nearly 2% at $870.39. Nevertheless, as an important driver of the U.S. stock market's rise since the beginning of the year, NVIDIA briefly entered a technical adjustment zone this week, which is worth being cautious about.
