Nvidia’s failure leaves investors eyeing $100 stock amid ‘void’

A sell-off in stocks that wiped a record $279 billion off Nvidia Corp.’s market value Tuesday has investors scouring charts for clues as to where the crisis might end.

For Jay Woods, chief global strategist at Freedom Capital Markets, $100 a share is a key level to watch — around last month’s low close. Nvidia shares gained 1% on Wednesday, trading at $109.01 after falling 3.6% earlier in the session.

“I don’t want to see the stock make a new closing low, breaking the August low. That would really suggest something has changed, at least technically,” Woods said. “I think it’ll catch a bid around $100 and then move sideways for a while.”

The latest selloff — shares are down 14% over the past three trading sessions — was sparked by the chipmaker’s earnings, which fell short of expectations. Investor jitters were compounded by two research reports released Tuesday that issued warnings about the companies’ spending on artificial intelligence. More bad news came after the market closed, with Bloomberg reporting that Nvidia had received subpoenas as part of a U.S. Justice Department antitrust investigation.

The problem for Nvidia stock is that there aren’t many events on the calendar that could provide positive momentum, according to Michael Kirkbride, portfolio manager at Evercore Wealth Management.

“We’re in a bit of a vacuum right now. We’re done with earnings, and there’s a lot of economic data coming out this month. There’s a lot of caution about that,” he said. “When you’re in a trading vacuum, it becomes a shooting market that’s very short-term in nature.”

Nvidia’s slump, which has dragged down global chipmakers and risk assets, comes after a tumultuous few months for the AI market darling. Tuesday’s decline was the seventh time in two months that the stock has fallen 6% or more. A measure of Nvidia’s 30-day stock volatility also hit its highest level since mid-2022, according to data compiled by Bloomberg.

Investors will also be looking back at the past month to see where Nvidia’s stock might bottom out. Nvidia sank into a correction in August that ultimately saw the stock fall 27% from its June peak before rebounding to within 5% of its record. The reasons for that decline — macroeconomic concerns combined with renewed concerns about the sustainability of big AI spending — are being repeated now.

Concerns about the relatively small returns on the tens of billions of dollars spent by Nvidia’s largest customers were at the center of research reports released Tuesday by JPMorgan Asset Management and BlackRock Investment Institute.

Michael Cembalest, president of market and investment strategy at JPAM, wrote that demand from enterprise clients — not just clients like OpenAI training new AI models — will need to increase over the next 12 to 18 months to justify the massive spending on the technology.

Meanwhile, Jean Boivin, head of the BlackRock Investment Institute, said investors need to be patient because expanding data centers and adding computing power typically takes “years — not quarters.”

Regardless, Boivin said investors should continue to invest in AI stocks because the recent sell-off in the tech sector “signals an opportunity for asset recovery.”

Woods of Freedom Capital and Kirkbride of Evercore WM also have a positive view of Nvidia over the long term.

Woods sees no reason to panic over this week’s decline, while Kirkbride said there is nothing fundamentally wrong with the company or its earnings report.

“We continue to be long-term holders of the stock and have not heard anything that would change the situation, either with respect to Nvidia or its customers and their spending plans,” Kirkbride said.

“We would be buyers here.”

Technology chart of the day

Nvidia may be only the third-largest member of the S&P 500, with a 6.1% weighting in the index, but it has become a major driver of the benchmark this year. The chipmaker’s share price has dictated the broader market since January, and its crash this week doesn’t bode well for the index.

Top technology news

— The U.S. Justice Department has sent subpoenas to Nvidia and other companies seeking evidence that the chipmaker violated antitrust laws, escalating its investigation into the dominant AI chip supplier.

—OpenAI CEO Sam Altman’s plans for a massive expansion of the machines and systems needed to advance artificial intelligence are becoming clearer, starting with a U.S. effort estimated to cost tens of billions of dollars, according to a person familiar with the matter.

—Nvidia has participated in a funding round worth more than $100 million for Tokyo startup Sakana AI, one of the largest investments the American chipmaker has made in Japan’s burgeoning artificial intelligence industry.

—Swedish shipping company Telia Co AB plans to cut 3,000 jobs, about 15% of its total workforce, as the company grapples with loss-making units and faces increasing competition from rivals in its core markets.

—Sony Group Corp. is pulling the plug on a major online game it released just two weeks ago, marking one of the biggest flops in PlayStation industry history.

The results will be announced on Wednesday

—PostmarketHewlett Packard Enterprise

—With assistance from Henry Ren and Michael Msika.

(Nvidia stock updates are rolling out sitewide.)

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