Nvidia Shares Search for Support Amid Steep Selloff

The artificial intelligence chip leader Nvidia has rattled investors with a sharp and sustained decline in its share price. Despite presenting a fundamentally robust financial picture, the stock has recorded four consecutive days of losses, breaching a key technical level not seen since May. This divergence between strong performance and weakening investor sentiment raises questions about the underlying causes of the sudden confidence shift.

Strong Fundamentals Clash with Market Jitters

In a seemingly contradictory development, this technical breakdown coincides with exceptionally strong quarterly results. In late August, Nvidia reported record second-quarter revenue of $46.7 billion, representing a 56% surge compared to the previous year. Its data center business alone reached $41.1 billion.

Looking ahead, management provided a revenue outlook of approximately $54 billion for the current quarter, surpassing analyst expectations. Chief Financial Officer Colette Kress reinforced the long-term bullish case by forecasting AI infrastructure expenditures could reach $3 to $4 trillion by the end of the decade. Even after the recent pullback, the stock remains more than 80% above its April low, and the average analyst price target still implies over 20% potential upside from current levels.

Geopolitical Tensions Weigh on Semiconductor Sentiment

Mounting geopolitical concerns appear to be a primary driver behind the sector-wide weakness. A recent appellate court ruling on Friday cast doubt on the legality of “counter tariffs” implemented during the Trump administration, reigniting fears of potential trade disruptions. This is a particularly sensitive issue for the semiconductor industry, which is deeply reliant on complex global supply chains.

The broader chip sector felt the pressure, with the PHLX Semiconductor index dropping 2%. Other major semiconductor stocks, including Broadcom and AMD, also traded lower. Compounding the pressure on technology valuations, rising bond yields have made growth stocks less attractive; the yield on the benchmark 10-year US Treasury note climbed to 4.239%.

Should investors sell immediately? Or is it worth buying Nvidia?

Technical Indicators Flash Bearish Signals

The intensity of the selloff has been significant. Nvidia’s stock broke through a critical threshold by falling below its 50-day moving average, situated around $171, for the first time since May. This technical level had provided reliable support during the summer rally. Market technicians are now watching for the next potential support levels near $160 and $145.

The scale of the decline is staggering, with roughly $340 billion erased from Nvidia’s market capitalization in just a few trading sessions. Trading volume surged to over 240 million shares, indicating substantial institutional selling pressure.

Key technical indicators are unanimously signaling bearish conditions:
– The Relative Strength Index (RSI) fell to 36.4, indicating oversold conditions
– The MACD indicator turned negative, registering -1.31
– Multiple moving averages are now signaling a sell

Critical Levels and Catalysts Ahead

Market experts at UBS have characterized the chip sector selloff as a potential buying opportunity, pointing to the historically strong performance of equities in October and November. They caution, however, that September is traditionally the weakest month for stocks.

For Nvidia to signal a definitive trend reversal, it must reclaim the $171 to $174 price zone. Until that happens, the stock remains vulnerable to further declines toward the $160 and $145 support levels. The next major catalysts for the share price are likely to be business updates and greater clarity on the future of US trade policy.