Semiconductor giant Nvidia’s (NASDAQ: NVDA) venture into chips supporting artificial intelligence (AI) models has elevated the company’s stock to emerge as the sector’s leader.
However, based on the stock’s recent price fluctuations, concerns are emerging that the rally witnessed in 2024 might end.
Particularly, in an X post on July 25, Puru Saxena, the founder of AlphaTarget research firm, shared a stark assessment of Nvidia’s stock performance, signaling that the era of exponential gains for the “AI King” might be drawing to a close.
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This declaration follows a strategic move in which Saxena’s firm sold its remaining Nvidia shares over concerns the bearish sentiments might continue.
Notably, Nvidia has experienced significant volatility. Analysis by Saxena indicated that Nvidia reached a peak of $140.76 before experiencing a sharp decline to $118.04. Following this dip, a brief rally saw sellers emerge around $136, marking a lower high. This week, Nvidia’s stock has sliced through its recent low, a development that alarms investors.
Nvidia’s position relative to its 40-week moving average is a critical factor in this analysis. The stock remains approximately 45% above this benchmark, suggesting a potential overvaluation. The breakdown below the lower high indicates a bearish trend, which bolsters the rationale behind the decision to sell.
Nvidia’s low buying volume
Volume trends further illuminate the situation, with heightened selling pressure in recent weeks. Additionally, momentum indicators reflect waning buying interest and increasing selling strength, compounding the bearish sentiment.
For weeks, Saxena and his team have been sounding the alarm about Nvidia’s overextended position relative to its 40-week moving average. The stock’s recent breakdown has validated these concerns, prompting AlphaTarget Research Firm to lock in gains and mitigate potential risks associated with further declines.
Notably, it remains to be seen how Nvidia’s performance will impact the general AI sector, considering the company has played a pivotal role in advancing artificial intelligence technologies.
At the same time, increased insider trading activity has heightened the possibility of the stock plummeting. Indeed, as reported by Finbold, Nvidia insiders offloaded 2,961,130 NVDA shares worth $376.68 million in 11 separate transactions in July alone.
Although the selling activity has been in line with the company’s laws, a section of the market believes that insiders might be cashing out in anticipation of a possible Nvidia sell-off.
NVDA price analysis
By press time, Nvidia was trading at $111. Although the stock has made gains of about 3% on the daily timeframe, it remains in the red for the week with dips of almost 9%.
Based on this week’s volatility, caution is warranted when looking at Nvidia’s stock, as the equity is at risk of falling below the $110 support zone.
Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.
