Stock Of The Day: Nvidia Breaks Support After DeepSeek AI Disruption

Stocks are getting crushed this morning. Shares of NVIDIA Corporation NVDA are off by more than 10%.

It looks like they may continue to head lower. This is why it is our Stock of the Day.

The catalyst for the selling is news from Chinese startup DeepSeek. It has made investors concerned that America is becoming less competitive in the AI industry.

DeepSeek launched a free open-source large language model. The company claims it was developed for less than $6 million in just two months. Last week DeepSeek released a reasoning model that reportedly outperformed OpenAI's in many tests conducted by third parties.

Read Also: Super Micro Stock Nosedives As DeepSeek AI Threat Rattles Investors

The move lower in NVIDIA has made it break the support around $129.75. This price action is bearish for stocks and suggests that the shares will continue to fall.

When a stock is declining, it means there are more shares available for sale than there are buyers. To attract buyers, sellers must lower their prices, which drives the stock into a downtrend.

If the stock drops to a support level, the situation changes. There is enough demand to absorb the supply. This is why selloffs end or pause when they reach them.

As you can see on the chart, there has recently been support for NVIDIA around the $130.00 level. The selloffs in December and early January ended when the shares reached this support. Each time, a rebound or rally followed.

Stocks tend to bounce off of support when some of the buyers who created the support become anxious. They are afraid they will be outbid by other buyers. They know the sellers will go to the buyer that is willing to pay the highest price and they don't want to miss the trade.

So, they increase the prices they are willing to pay. Other anxious buyers see this and do the same. It results in a snowball effect that moves the stock higher.

But now the support appears to have broken. The shares are trading below it.

This means the investors and traders who created the support with their buy orders have finished or canceled. With this large amount of demand taken off the market, sellers may be forced to knock the price down to draw them back into the market.

This could force NVIDIA even lower.

Read Next:

• DeepSeek Jitters Shatter US Tech Stocks, Wipe Out $1.2 Trillion On Wall Street: Analyst Eyes Four Chinese Giants Set To Benefit

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