Shares of chipmaking giant Nvidia have dropped almost 14 per cent so far this month from their March high of $974 as the broader rally pulled back last week in a correction phase from lifetime high levels. The bellwether for artificial intelligence (AI) chip manufacturer is now the third most-valued firm on Wall Street above Alphabet, Amazon, and Saudi Aramco.
Nvidia projected a three-fold surge in first-quarter revenue on strong demand of AI chips, after beating sky-high expectations and triggering a global tech rally late last month. On Wednesday, March 13, shares of Nvidia were trading 3.09 per cent lower at $890.71 on the NYSE. Market analysts are dividend on whether this is a buying opportunity or the rally is done for the time being.
“It is a bit too early to tell. In 2023 and 2024 pullbacks of less than 12 per cent have resulted in the price moving higher. Pullbacks of more than that have indicated choppy trading and bigger declines. The current pullback is just over that 12 per cent mark (13.6 per cent),” said Cory Mitchell, an analyst with Trading.biz.
Also Read: Why Nvidia share price is plummeting after 80% rally in YTD — explained
‘’If the price starts heading higher very soon, this uptrend remains intact. If it declines a bit more, that indicates likely a month or more of choppy trading or a bigger decline. The fundamentals still look as good as the company’s earnings are growing strongly,” added Mitchell.
Analysts predict Nvidia will grow its earnings by 30 per cent per year over the next five years. Despite the earnings growth, much of this up move has already occurred, even if there is some left.
Nvidia stock price movement
Nvidia stock failed to sustain at higher levels this month after the profit-booking trigger, which further deepened following the selling pressure in the S&P 500 and Nasdaq indices. They said the Wall Street indices suffered last week by disappointing US job data that dampened the US fed rate cut buzz.
The stock price is experiencing a bigger pullback than is ideal, say analysts. Since late 2022 when the price has pulled back less than 12 per cent following a strong rally, the rally tends to continue after the pullback. But, if the price drops more than 12 per cent following a rally, then choppier trading ensues or the pullback continues (drops more).
In late 2022, the price rallied 57 per cent and then declined only 11.28 per cent before starting to rally again. The next pullback dropped more than 12 per cent and continued into a 26 per cent decline.
Also Read: Nvidia’s inches closer to surpassing Apple to become world’s second-most-valuable company
Following a 66 per cent rally in early 2023, the price only declined 11.4 per cent before moving higher and went 105 per cent. The next pullback was only 10.9 per cent and a 29 per cent rally ensued. The next decline was 16 per cent and choppy trading continued for months.
From late 2023 into early 2024 the price rallied 66 per cent and then declined only 11.2 per cent before rallying again. It ran 47 per cent before selling off 13.6 per cent (the current pullback). ‘’If this pattern continues, the price will either continue lower or expect choppy trading over the next couple of months. Choppy trading means little to no progress above the recent high of $974,” said analysts at Trading.biz.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.
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Published: 13 Mar 2024, 10:01 PM IST