Nvidia has long symbolized the artificial intelligence revolution. And after a string of record highs and yet another earnings beat, Nvidia stock holds its spot on the IBD Leaderboard list of top growth stocks.
But as the AI-chip maker comes under some pressure, Apple has just overtaken Nvidia in terms of market capitalization weighting on the Nasdaq. Apple stock now accounts for 9.6% of the tech-heavy index, while Nvidia makes up 9.1%.
Plus, increased volatility and a recent pullback below its 21-day exponential moving average may have some investors wondering if Nvidia is becoming the poster child of the eight "secrets" of selling.
Nvidia Stock Faces This Symptom Of Success
After briefly hitting another record high on Thursday after reporting earnings the day before, Nvidia stock retreated below its 21-day line. Its relative strength line has slipped, but remains within striking distance of its 52-week high.
Nvidia's earnings and sales growth has been remarkable — including average earnings growth of 236% over the last three quarters. And analysts forecast 126% per-share earnings growth for the current fiscal year.
But the stock has already made a huge move since bottoming out in October of 2022. Its breakout in October of this year was from a late-stage base. Such formations entail more risk than first- and second-stage bases.
As is typical for later-stage patterns, Nvidia stock has become more volatile. Within its current fourth-stage base, weekly price swings have become wider, with multiple drops below the 10-week moving average.
On Monday, Nvidia fell over 4%in above-average and rising volume. It managed a small gain on Tuesday, closing above its 50-day line.
Nvidia Stock: It's Not All Or Nothing
With powerful growth and an established spot among the best AI stocks to watch, Nvidia certainly has the potential to keep climbing. But investors should note the recent volatility and selling pressure in its late-stage pattern, particularly for anyone who initiated a position from its latest breakout past a 140.76 buy point.
Investors in that situation do not have a profit cushion to safeguard them if Nvidia stock encounters an extended pullback.
Those who invested earlier and are sitting on large gains should continue to monitor rules for both how to buy stocks and when to sell stocks. One such guideline is how to scale out of winners in phases. Getting into and out of stocks gradually helps reduce risk, maximize profits and protect hard-earned gains.
So as Nvidia stock drops below its latest buy point but so far manages to hold above its 50-day moving average, investors should consider their own position, as well as their long- and short-term objectives.
Follow Matthew Galgani on X (formerly Twitter) at @IBD_MGalgani.
