Zinger Key Points
- Nvidia stock has gained about 164% year-to-date, outperforming the S&P 500 Index.
- The bulk of the market upside in the current bull run is fueled by Nvidia and its artificial intelligence technology-levered tech peers.
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Nvidia Corp. NVDA shares trade just shy of their record highs and “FOMO” sentiment is driving more traders toward the stock despite its pricey nature. Michael Kramer, founder of Mott Capital Management and who runs an actively managed long-only Thematic Growth Portfolio, on Thursday, suggested that investors can play the waiting game to get into the stock at more attractive levels.
What Happened: Nvidia could be in for a 30% downside from current levels, Kramer said in a post on X, formerly Twitter, basing his deduction on a technical chart. He sees the stock pulling back to the level it was at before it gap-opened higher in the aftermath of the company’s first-quarter earnings report released after the market close on May 22.
Nvidia ended the session at a split-adjusted price of $94.94 and a return to the level would mean a plunge of 27.40% from current levels. A 30% pullback from the recent highs will push the stock well into deep correction territory.
See Also: Best Artificial Intelligence Stocks
Why It’s Important: The forecasted drop in Nvidia shares likely bodes ill for the market. The bulk of the market upside in the current bull run is fueled by Nvidia and its artificial intelligence technology-levered tech peers. The AI frenzy helped Nvidia become the most valued global corporation on Tuesday before the more than 3% drop on Thursday relegated it to the second spot behind Microsoft.
Analysts say the market rally will unlikely broaden to include small-cap and stocks belonging to other sectors unless the Federal Reserve commits to cutting the Fed funds rate this year.
Nvidia is a fundamentally sound company having exposure to a technology that is likely to rule the roost at least over the next three years.
The question before the minds of investors and analysts is whether Nvidia can continue to grow at a scorching pace to justify its heady valuation, especially with competition beginning to threaten its near monopoly position in the market for AI accelerators. Nvidia does have its unique selling proposition of being a fully integrated AI company, and its first-mover advantage could also come in handy.
Price Action: Nvidia’s shares were down 2.02% in premarket trading on Friday, after closing 3.54% down at $130.78 on Thursday, according to Benzinga Pro data. The stock has gained 171.50% year-to-date, outperforming the S&P 500 Index, which is up a more modest 15.40%.
Read Next: Here’s How Much You Should Have Invested In Nvidia In 2022 To Become A Millionaire Today
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