Nvidia Faces Further Challenges as Market Observers Monitor Trends

Nvidia's stock experienced a slight increase on Tuesday, but it remains significantly below key market indicators, leading financial professionals to closely observe its moving averages.

Focus on Moving Averages

The decline in Nvidia Corp. shares over the past month has prompted market technicians to monitor a crucial momentum indicator for potential further declines. Chart analysts are particularly concentrating on the 200-day moving average, which was previously surpassed in January for the first time in over two years. Despite a modest rise on Tuesday, Nvidia's stock trades well under this vital benchmark, sparking concern among market watchers regarding its future trajectory.

"This marks a noticeable shift from the previous two years," said Todd Sohn, a senior ETF and technical strategist at Strategas Securities LLC. "Tactically, it becomes challenging to stay very optimistic about the stock once the 200-day moving average begins to trend downwards."

Sohn has indicated that he is closely monitoring the $113 per share level, the intra-day low reached in February. Similarly, Rick Bensignor, CEO of Bensignor Investment Strategies and a former strategist at Morgan Stanley, is also observing this price point. "I suspect there's further weakness ahead," remarked Bensignor. "Support may be found between $110 and $107; if it drops below this, my lower target stands between $107-103, with the next crucial support around $90."

Broader Market Impacts

The downturn in Nvidia's stock aligns with a general market uncertainty that has affected the largest technology companies. The Magnificent Seven, a group of dominant tech firms, recently entered a correction phase, having fallen over 10% from their peak. The Nasdaq 100 Index appears close to reaching a similar fate.

Nvidia alone has contributed more than 30% to the Nasdaq's decline this year. Other companies like Tesla Inc. and Broadcom Inc. are also contributing to this downward trend, with both nearing their own 200-day moving averages.

The concerns surrounding Nvidia have intensified with the advent of DeepSeek, as well as broader questions regarding President Donald Trump's tariffs and how technology firms, particularly those engaged with China, might be affected.

Amid these challenges, analysts like Buff Dormeier, chief technical analyst at Kingsview Partners, have expressed skepticism. "We may have reached a long-term peak for this stock. Nvidia remains integral to AI developments, but discussions around AI are ongoing," he noted. "The stock appears worn out over the long haul; the flattening 200-day trendline indicates weakening momentum and a potential shift."

Valuation and Market Sentiment

As the selloff continues, Nvidia's valuation based on projected earnings has decreased to about 25, the lowest it has been in over a year. In comparison, the Nasdaq trades at roughly 22 times forward earnings, while the S&P 500 Index sits around 20.

This decline in valuation, combined with recent negative sentiment towards the shares, has surprised some investors, especially considering the top technology firms are set to invest billions in artificial intelligence in the forthcoming years. Analysts at Bernstein, led by Stacy Rasgon, commented, "The drop in valuation is quite striking, particularly at the onset of a new product cycle with Nvidia's Blackwell chip line. Concerns that the AI market has peaked seem a bit early to us, and the valuation appears increasingly appealing."

Nevertheless, analysts urge caution until broader market pressures ease. Citigroup analysts, led by Atif Malik, stated, "While the risk-reward scenario looks favorable with stock prices below historical lows, investors are likely awaiting clarity regarding the overhang caused by AI restrictions and tariff effects on gross margins."

Nvidia, Market, Stocks