Nvidia Stock Just Fell Below a Key Level. What That Means.
Updated Jan 30, 2025, 4:12 pm EST / Original Jan 30, 2025, 3:19 pm EST
Updated Jan 30, 2025, 4:12 pm EST / Original Jan 30, 2025, 3:19 pm EST
The broader
stock market rose Thursday, but for much of the day, Nvidia
investors weren’t taking part in the rally. Fans of the AI chip giant
may need to get used to being left behind.
Shares of Nvidia ended
Thursday up 1% to about $125, but shares spent most of the day in red and
briefly dipped below a key technical measure. That could mean more downside
ahead.
Nvidia NVDA+0.98%
stock has now tumbled nearly 7% so far this year. Earlier Thursday, the
shares stumbled to around $118, breaching their 200-day moving average around
$122. This figure—calculated by taking the average closing price of a stock
over the prior 200 trading days—is often viewed by technical analysts as a key
resistance level, or a floor for a stock if you will. Once a stock goes below
that, some fear that there’s much more room to fall.
Nvidia has been rocked this week due to worries about
competition from cheaper artificial-intelligence technology from China,
following the release of a new AI chatbot app named DeepSeek. Short
sellers—investors who bet that a stock will go down —piled
into Nvidia’s shares Monday, compounding the selloff that ultimately
resulted in the stock’s one-day drop of 17%.
Interestingly though, Nvidia’s near-term market woes
are n’t
creating a sense of panic for stocks overall, the tech sector’s Magnificent
Seven, or even the rest of the semiconductor sector.
The PHLX
Semiconductor Index SOX
+2.29%, which includes Nvidia, jumped more than 2% Thursday and has stabilized
since Monday’s crash. It’s also worth noting that several other big chip
stocks, such as Broadcom AVGO
+4.51%, ARM
Holdings, Marvell
Technology, and Taiwan
Semiconductor rallied Thursday and are trading above their 200-day
moving averages.
The Roundhill
Magnificent Seven exchange-traded fund is also about 20% above its
200-day moving average, a sign that the DeepSeek scare hasn’t hurt tech
heavyweights Apple, Microsoft, Meta
Platforms, Amazon.com, Alphabet,
and Tesla.
So the Nvidia selloff might not be a sign of further
weakness in tech overall. It could simply be the case that Nvidia’s shares,
which more than doubled in 2024, needed to cool off a bit.
When discussing Nvidia and DeepSeek, Wall Street may be
talking a lot about the so-called Jevons
Paradox, the notion that a decline in something’s price will lead to higher
demand. But Isaac Newton’s more famous line about the law of gravity might best
describe what has happened (and could happen next) for Nvidia stock: What goes
up must come down.
Write to Paul R. La Monica at paul.lamonica@barrons.com
