Nvidia’s stock now down 10% from record high

The global semiconductor industry faces a notable shift as Nvidia, the leading AI chip manufacturer, experiences a significant market correction amid broader sector movements.

Market correction details: Nvidia’s stock has entered correction territory, dropping more than 12% from its record closing high of $148.88 reached in November.

• The stock declined over 2% on Monday, extending its December losses to 5%
• Despite the recent pullback, Nvidia shares have still surged 165% in 2024
• A market correction is generally defined as a decline of 10% or more from recent highs

Underlying factors: The recent downturn may reflect profit-taking activity following Nvidia’s extraordinary performance throughout the year.

• The company’s success has been largely driven by surging datacenter demand since ChatGPT’s launch in late 2022
• Nvidia’s graphics processing units (GPUs) play a crucial role in powering large language models, which are the foundation of advanced AI systems
• The stock’s recent weakness comes despite its dominant position in the AI chip market

Broader market context: While Nvidia experiences a correction, the overall semiconductor sector shows resilience with several competitors posting gains.

• Broadcom reached new highs with an approximately 8% surge during Monday’s trading
• Micron Technology advanced about 7% ahead of its earnings report
• Other semiconductor companies including Marvell Technology, On Semiconductor, Lam Research, and Taiwan Semiconductor all posted gains of 1% or more

Technical analysis: Market observers are closely monitoring specific price levels that could indicate broader market implications.

• Roth MKM identifies the $125 to $130 range as a critical test for both Nvidia’s stock and the overall market
• The continuation of Nvidia’s underperformance while major market indices reach new highs could serve as a potential warning signal

Market dynamics and implications: The divergence between Nvidia’s performance and its semiconductor peers raises questions about sector rotation and market leadership.

• The ability of other chip manufacturers to advance while the sector leader retreats suggests investors may be diversifying their semiconductor exposure
• The recent price action could indicate a shift in market sentiment regarding AI-focused investments versus broader semiconductor opportunities