After once topping the list of US stock market cap, Nvidia has experienced a three-day consecutive decline with a cumulative decline of nearly 13%. The stock price has entered a technical correction phase. As of the time of writing, Nvidia has rebounded slightly with a pre-market rise of more than 3%.
It is worth mentioning that as the AI leader whose stock price has risen seven times in two years, Nvidia also staged a similar "interlude" at the end of March this year. From March to April 19, due to the change of interest rate expectations, Super Micro Computer's performance warning and other bearish attacks, Nvidia, which had been rising all the way, experienced a brief correction, with the highest decline reaching nearly 20%, which also caused market concerns.
Now, facing the headwind again after the recent stock price high, can Nvidia be as calm as it was in March?
Analysts: Still optimistic about the long-term rise of AI, but need to pay attention to the support level of $100.
Nvidia's current round of decline began last Thursday (June 20), when the stock briefly touched its historic high of $140.76, but plunged in the intraday market, with the highest amplitude reaching 8%. Meanwhile, with the arrival of last Friday's largest "triple witching day", the market generally speculated that the expiration of a large number of call options would dampen Nvidia's upward momentum, coupled with the adverse impact of executive selling news, jointly leading to Nvidia's continued stock price decline for three consecutive days thereafter.
In addition, with Nvidia's continuous new highs, there have been concerns about the overheating of the stock price. In the process of rising stock prices, a large number of profit-taking positions have accumulated in the market. With the release of good news such as stock splits and market value dominance, these profit-taking positions choose to take profits and leave the market at the periodic high point, causing a correction.
However, in the face of this short-term disturbance, most Wall Street players still believe that the long-term trend of artificial intelligence development is unchanged. Recently, there has been a difference of opinion in the market about whether Nvidia's rise has been too fast, but its solid profit foundation is beyond doubt. In terms of performance growth rate, Nvidia's gross margin has reached 78%, an increase of 262% compared with the same period last year, and its forward P/E ratio is still "not high".
Tomorrow, Nvidia will also hold its annual shareholders meeting where investors will vote on executive compensation, board of directors reelection, and approval of accounting firms. Although the market does not expect any major announcements to be made during the meeting, Nvidia can use the time to showcase its advantages in the AI era.
Statistical data for the ratings of 40 analysts show that more than 97% of analysts still recommend buying Nvidia, with an average target price of $136.64, representing a 15% upside from the latest closing price. More analysts are fearless of the correction and are bullish on Nvidia, with both Bank of America and Jefferies Financial raising their target price for Nvidia to $150.
From a technical point of view, the head of technical analysis at Oppenheimer said that Nvidia's short-term support level is around $115. Under normal circumstances, the formation of the main top of the stock price requires a process, which needs to go through several rounds of buying and selling, and then the price momentum will gradually form, and the key price level will also be lost. But at present, there is still no sign of this happening.
Many traders also suggest that investors who want to wait and see should pay attention to the support price of $100. As the election approaches and the Fed weighs interest rates, there is downside risk in the market, but the long-term upward trend remains strong.
As AI chip stocks fall, will the bull market be "healthier"?
After Microsoft, Apple, and Nvidia's market values successively exceeded $3 trillion, the three companies accounted for more than 20% of the weight of the S&P 500 index. Global funds bear up large technology stocks and AI, making concerns about the concentration of the US stock market rise. However, this phenomenon is also a "double-edged sword": on the one hand, markets that are too concentrated often mean "risk concentration"; on the other hand, the increasing concentration is also an important feature of the bull market in the US stock market.
During the backtracking of chip stocks such as Nvidia, investors also anticipate market rotation, because such rotation, although not accelerating the rise of the US stock market, can make the bull market "go further".
Peter Oppenheimer, Chief Global Stock Strategy Officer of Goldman Sachs, recently released a report indicating that the trend of increased concentration in the stock market is now subsiding, and diversification is playing a role again. After US technology/growth stocks have been leading the world for the past few years, European banks and US value sectors such as public utilities are catching up rapidly. $Utilities Select Sector SPDR Fund (XLU.US)$The stock has risen by more than 14% since March this year, after the speed of its rise accelerated.
Larry Tentarelli, the chief technology strategist of the Blue Chip Daily Trend Report, believes that the PHLX Semiconductor Index rose more than 13% in June, which indicates that the AI heat may have gone too far. "In the short term, technology stocks may experience a pullback, and other parts of the market will also see healthy rotation, which will keep the bull market going."
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