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Why is Nvidia stock going down today?

Why is Nvidia stock going down today?

Both experts and investors have been rather bullish in the weeks leading up to Nvidia’s (NASDAQ: NVDA) earnings report, which is scheduled for the market’s close on February 21. 

Overall, the expectations are that the semiconductor giant will report a significant increase in earnings and revenue compared to Q3 and even that it may beat the already-high Nvidia forecasts.

Nvidia stock chart

This bullish attitude is well-reflected in the stock market, where the blue-chip chipmaker’s shares have been steadily rising since the start of 2024. By press time, NVDA is 44.19% in the green year-to-date (YTD).

NVDA YTD stock price. Source: FInbold

The trend started shifting in the extended session on the President’s Day weekend and notably changed direction in the first full trading session after the holiday – on Tuesday, February 20.

In total, Nvidia’s stock price fell $31.61 per share in a single day – 4.35% – to $694.52, collapsing the microchip maker’s market cap by nearly $80 billion from $1.793 trillion to $1.715 trillion. The decline continued into the extended session between Tuesday and Wednesday, and NVDA share prices are down another 1.96% by press time.

NVDA 1-day stock price chart. Source: Finbold

Why is Nvidia stock price dropping?

While it is hard to tell exactly why Nvidia’s shares have experienced their biggest 1-day decline since October on Tuesday, February 20, there has been some chatter that the semiconductor giant’s stock has risen so much that it may be forming a new technology bubble.

Said fears became most evident after Nvidia Corporation’s performance on February 12 when the microchip maker’s stock fell significantly in the second half of the trading day, seemingly without reason.

NVDA stock price chart for February 12. Source: Finbold

Another factor that might be contributing to the most recent decline are the fears that Nvidia’s Q4 results might not have been as good as it is widely expected, largely due to issues with exports to China that arose in the timeframe – and indeed, it isn’t unheard of that NVDA stock declines after publishing a strong earnings report due to not meeting overly optimistic investor hopes.

Could NVDA stock collapse to $600?

At the time of publication, Nvidia’s stock is likely bound for a brief but intense period of uncertainty. While the extended session trend has continued NVDA’s Tuesday decline, there are no guarantees that the market’s opening won’t bring a rally.

Furthermore, the coming days are also uncertain, and, indeed, the earnings report late on February 21 has the potential to make or break any trend that might form on Wednesday – depending on whether Nvidia manages to meet and beat expectations and by how large a margin the chipmaker does either of the two.

Given NVDA’s latest close at $694.52, a drop all the way to $600 might appear too major to be feasible, but the chipmaker’s stock has been moving at such a pace this year – at one point adding $100 billion to Nvidia’s market cap each week – that it isn’t out of the realm of possibility. 

Additionally, those wishing to short NVDA stock have some backing in the form of institutional forecasts. 

While the overall outlook remains positive, Citigroup (NYSE: C) recently set their price target for the semiconductor blue-chip at $575 – 17.21% below the press time price – and the lowest forecast places Nvidia’s shares at $560.

Still, it is noteworthy that Citi retained its “buy” rating for the stock despite the low price projection.

NVDA analyst rating. Source: NVDA

Nvidia leads, and the tech sector follows

Given Nvidia’s dominant position as the main microchip supplier of the ongoing artificial intelligence (AI) boom – and indeed, as the leader of the entire semiconductor industry – it is hardly surprising that prominent analysts have increasingly been viewing the success of NVDA’s shares as pivotal to the wider technology industry.

In his bullish analysis of Nvidia’s stock, CNBC’s Jim Cramer stated that “if you think that Nvidia’s quarter is one and done, you’re also thinking that AI is one and done,” as recently as February 20.

Similarly, a prominent trader and analyst on X, Gurgavin Chandoke, attached an image hinting that should Nvidia’s stock tumble, other major firms, including Microsoft (NASDAQ: MSTF) and Tesla (NASDAQ: TSLA), will follow suit, in his post outlining the expectations for the earnings report.

Indeed, February 20  trading already demonstrated that the stock performance of the technology giants is closely tied as other firms in the industry also notably declined – Microsoft by 0.31%, Apple (NASDAQ: AAPL) by 0.41%, Tesla by 3.10%, and Amazon (NASDAQ: AMZN) by 1.43%, just to name a few.

S&P 500 1-day heatmap. Source: Finviz

As could, perhaps, be expected, the biggest losers in addition to Nvidia included Advanced Micro Devices (NASDAQ: AMD), which closed on Tuesday 4.35% in the red, and Super Micro Computer Inc (NASDAQ: SMCI), which ended the day 1.96% down, but fell another 3.69% in the extended session.

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