As Nvidia (NASDAQ: NVDA) stock continues to face bearish sentiment after plunging below $140, a technical strategist has weighed in on the potential impact of this downturn on the broader market.
Nvidia has enjoyed an impressive run for most of the past year, fueled by its dominance in producing artificial intelligence (AI) chips.
However, this leadership position has sparked concerns that if the chipmaker’s stock crashes, it could drag down the entire stock market, at some point earning comparison to Cisco’s (NASDAQ: CSCO) plunge during the Dot-com bubble burst.
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To this end, Blue Chip technical strategist Larry Tentarelli is unconvinced by this notion, pointing to the current divergence between NVDA’s performance and the market’s upward momentum, he said in an X post on December 16:
At its latest price, just above the $130 support zone, NVDA is down about 14% from its recent highs. Yet, the Nasdaq-100 ETF (QQQ), which closely mirrors the tech sector, continues to print new highs.
According to Tentarelli, this decoupling indicates that the market is finding new leadership and isn’t solely reliant on Nvidia.
NVDA’s consolidation zone
Tentarelli explained that NVDA is in a healthy consolidation phase following its massive gains earlier this year. He noted that other blue-chip stocks like Tesla (NASDAQ: TSLA) and Broadcom (NASDAQ: AVGO) are stepping in to drive markets higher.
Indeed, at the close of the last trading session, NVDA’s share price was valued at $132, down 1.6% for the day. On the weekly chart, the losses have extended to nearly 5%.
Similarly, during pre-market trading on December 17, NVDA stock was down almost 1.8%, trading at $129. Of interest, analysts had previously warned that dropping below $132 could be ‘goodnight’ for Nvidia.
In recent sessions, Nvidia has extended its sell-off, partly triggered by an antitrust investigation by Chinese authorities into the semiconductor giant. The emergence of this news caused NVDA to lose momentum toward reclaiming the $150 level, subsequently plunging below $140.
Notably, Nvidia has failed to capitalize on the recent chip sector rally, which was driven by Broadcom’s reporting better-than-expected earnings and forecasting a positive outlook for its AI segment over the next three years.
Nvidia’s apparent stall comes when Tentarelli earlier cautioned that the company might face challenges in attracting new investors due to its massive market cap. The expert sees Nvidia losing ground to emerging AI firms but maintains that the firm’s potential to meet sector-specific demands remains unshakable.
Wall Street’s Nvidia outlook
Despite the short-term roadblocks, several Wall Street analysts remain optimistic about the company’s growth. For instance, as reported by Finbold, William Stein, CFA, senior technology analyst at Truist Securities, reiterated his ‘Buy’ rating, setting a price target of $204 for Nvidia stock, up from the previous $169, based on the company’s likely continued dominance in the AI space.
Given artificial intelligence’s potential and the next-generation Blackwell chips expected to spur growth, other analysts maintain an ambitious outlook for the tech giant.
For instance, Danish Saxo Bank estimates that Nvidia could more than double its valuation before the end of 2025 to become the first $7 trillion firm.
Such an evaluation would undoubtedly cement Nvidia’s leadership role in the stock market, and a potential crash from such levels could have devastating effects on general equities.
Featured image via Shutterstock
