With shares of semiconductor giant Nvidia (NASDAQ: NVDA) surging to new highs, technical indicators are flashing warning signs as the stock enters its most overbought territory in over a year.
According to the Relative Strength Index (RSI), NVDA is now trading above 78, its highest reading since June 2024. Notably, the last time the RSI reached this level, the stock subsequently declined by 35%.
This pattern has raised concerns of a potential sharp pullback, as historically, such elevated RSI levels often precede market corrections.
Nvidia receives a boost from China
The red flag emerges as Nvidia briefly traded above the $171 mark for the first time. At the time of writing, the stock was up over 4%, changing hands at $170.92. Year-to-date, NVDA has gained 23%.
The latest rally comes on the heels of Nvidia’s announcement that it plans to resume sales of its in-demand H20 GPU to China. The company has filed for U.S. regulatory approval and expects to receive licenses soon.
Adding to the momentum, Nvidia also launched a new export-compliant RTX Pro GPU designed for industrial use in China.
Still, there are growing concerns. U.S. Treasury Secretary Scott Bessent warned on July 15 that Chinese firms are rapidly developing rival chips. This move could erode America’s lead in AI hardware and cast doubt on Nvidia’s long-term edge.
It’s worth noting that earlier this year, Nvidia shares also took a hit following the rise of China’s DeepSeek AI. This lightweight model rivals Western offerings, such as OpenAI’s ChatGPT, using far fewer resources.
Despite growing competition, Nvidia remains the face of the AI boom and has recently become the first company to surpass a $4 trillion market capitalization.
Featured image via Shutterstock
