Nvidia stock is hoping to shake off weeks of gloom, with today marking the third week of declines for the chipmaker.
Nvidia saw a surge in volume in August, which could indicate institutional selling.
While shares are potentially forming a base, the recent lighter trade volume could make room for Nvidia bulls to return, says Investor Business Daily's David Saito-Chung.
But friction in Nvidia's stock points to a wider unease in semiconductors. Investors are concerned about market valuation and the demand for artificial intelligence.
Nvidia stock formed a cup pattern late last year before its meteoric ascent in mid-January. The chipmaker remains a strong performer, with shares still up 183% year to date. Nvidia stock has a best-possible IBD Composite Rating of 99, according to IBD Stock Checkup. Plus, it ranks first in the fabless semiconductor industry group.
Meanwhile, the VanEck Semiconductor ETF is forming a flat base that began in August. The ETF, which tracks U.S. semiconductor production and equipment, serves as a barometer for the industry.
AI Hope Spurs Nvidia Stock, Arm IPO
Investors hope artificial intelligence and advances in the field will spur demand for semiconductors. Nvidia has been riding the AI wave of demand because its graphics processors are particularly well-suited for the multitasking required by generative AI systems like ChatGPT.
Some companies are taking that hope into their own hands. Semiconductor design expert Arm made its initial public offering last week, only to see its shares decline as investors questioned its initial valuation compared to a buyout offer from Nvidia last year.
Cooling hope — and hype — over artificial intelligence may be contributing to the decline. Cathie Wood's Ark Invest recently sold some of its Nvidia stock.
A resurgent Nvidia could be the tide that spurs the semiconductor industry, and potentially even the wider market, says Eric Krull, author of The Lifecycle Trade. "I want to see leading stocks gain again," he said. "It's certainly in some sort of correction. It's basing. And I'm going to see a stock like this coming back."
