Nvidia's stock has experienced a significant downturn, dropping below a crucial technical level for the first time since early 2023. This decline, triggered by investor concerns over a new AI model from China called DeepSeek, erased nearly $600 billion in market value. Analysts are divided on the future trajectory of Nvidia's stock, with some predicting further declines and others foreseeing a period of consolidation. The company's upcoming earnings report on February 26 is seen as a key event that could provide clarity on its performance and valuation.
Market Reaction to DeepSeek Sparks Volatility
The sudden plunge in Nvidia's stock price has been attributed to investor anxiety over DeepSeek, an advanced AI model developed by a Chinese startup. This concern caused shares to drop sharply, falling below the 200-day moving average—a critical indicator for long-term trends. The stock has fluctuated around this threshold, signaling a potential shift in its upward momentum. Analysts suggest that Nvidia's stock may face further downward pressure unless it can stabilize above key support levels.
Investors have shown hesitation to buy into Nvidia's dip, indicating a lack of confidence in its immediate recovery. According to Will Tamplin, a senior analyst at Fairlead Strategies, Nvidia's stock is likely to experience deeper corrections towards secondary support levels. He warns that the intermediate-term momentum remains negative, and the stock has not yet entered oversold territory, suggesting more downside risks. David Keller from Sierra Alpha Research also expressed concerns about the absence of buying activity, emphasizing that Nvidia's chart remains "guilty until proven innocent" without regaining the $130 mark.
Potential Pathways for Nvidia's Stock
While short-term volatility looms, opinions vary on Nvidia's long-term prospects. Some analysts believe the stock will enter a sideways consolidation phase rather than an outright downtrend. Ari Wald from Oppenheimer & Co. anticipates continued oscillations around Nvidia's flattening 200-day average, with resistance at $140 and support at $100. He expects Nvidia to eventually resume its uptrend but advises investors to adopt a cautious approach until the stock stabilizes.
Ryan Detrick, chief market strategist at Carson Group, points out that Nvidia's recent decline does not necessarily signal broader market weakness. Instead, he sees it as part of a healthy rotation within the bull market. Detrick notes that Nvidia must deliver strong earnings to justify its premium valuation when it reports on February 26. The earnings report will be a pivotal moment for Nvidia, offering insight into its financial health and strategic direction amid the current market uncertainty.