Nvidia stock is vulnerable to a fifth day of declines that, if realized, would mark the stock’s longest losing streak since last December.
Shares of Nvidia (ticker: NVDA) opened 1% lower on Tuesday, weaker than the S&P 500 and Nasdaq indexes. After a brief rise into the green, the stock was recently down 0.3%. The stock had already lost more than 8% in September as of Monday’s close, thus retreating from an all-time high. On Tuesday, the stock is at risk of experiencing its longest downtrend since the five-day period ending Dec. 20.
There are likely a few factors weighing on the shares, which are still up an impressive 209% so far in 2023 – lest you forget – as the chipmaker became a major beneficiary of investor frenzy over artificial intelligence.
On the one hand, there could be investors who take profits. Nvidia shares have been on a mostly downward trend since the stock’s record closing price of $493.55 on August 31. Given the stratospheric performance of stocks in 2023, you really can’t blame investors for withdrawing some money now. A similar trend was also seen after Nvidia reported earnings in August: The stunning numbers sparked an initial surge in the stock price, but that eventually faded as traders sold on the good news.
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There’s also the question of bond yields, which have risen as investors change their expectations about the future of interest rates ahead of the Federal Reserve’s rate decision next week. Tech stocks like Nvidia are sensitive to bond yields as higher yields on risk-free Treasury bonds dampen demand for riskier bets like high-growth stocks. The yield on the benchmark 10-year U.S. Treasury note climbed to 4.29% on Tuesday, compared with 4.11% on Aug. 31, when Nvidia shares peaked.
Then there are worries about China, a market that continues to be important to Nvidia. Shares of Apple (AAPL) slipped last week, weighing on the broader tech sector after reports that China has banned iPhones for government workers and investors began to worry about the prospect of broader bans by Beijing. It’s the latest salvo in the U.S.-China tech cold war that has hurt stocks, and with Nvidia’s exposure to China — and already having fallen victim to U.S.-China machinations — risk aversion has not stayed with Nvidia spared.
Insiders selling shares should also not be discounted. Nvidia CEO Jensen Huang has sold more shares this month, filings showed late Monday. Although these sales are a pre-arranged trading plan that has been in place for months, they should not be dismissed as additional selling pressure.
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Still, there are still plenty of reasons to be optimistic about Nvidia stock, which remains bullish on Wall Street. The shares have an average rating of “Buy” from nearly 50 analysts surveyed by FactSet, with a consensus target price for the stock of nearly $650 representing a 44% upside from current levels.
A series of short-term declines in Nvidia’s stock price – even a historically bad period – shouldn’t change the big picture.
Write to Jack Denton at [email protected]