Nvidia retreated ahead of Thanksgiving Day, slipping below its 50-day average on Wednesday. Nvidia stock shed 1.2% to close at 135.34.
Analysts cited post-earnings reactions which focused on a good-but-not-great outlook. But the tech behemoth appeared to also be weighed down by growing chatter about a new China trade war.
"We believe it's a digestion period post earnings along with some China tariff worries weighing on Nvidia," Wedbush analyst Dan Ives told Investor's Business Daily.
The AI chip powerhouse posted strong third-quarter results. But Nvidia's outlook, which was better-than-expected, underwhelmed many on Wall Street.
Worries of the impact of a potential trade conflict with China also reemerged this week. President-elect Donald Trump this week said he plans to impose big tariffs on goods coming from China, Canada and Mexico on his first day in office.
"Should they come to pass, the direct impact of these new tariffs on semiconductors would be very small as imports of 'raw semiconductors' into the U.S. from these affected countries are tiny," Bernstein Research analyst Stacy Rasgon, who covers Nvidia and the semiconductor industry, told clients in a note.
But he also said "escalation remains the larger potential worry as overall semiconductor imports (from all countries) might be large enough to be affected by more broad-based actions should the new administration feels so inclined."
Ray Wang of Constellation Research said a trade war with China has become a concern, but these worries are still based on speculation.
"They're worried about a trade war, but it hasn't hit them yet," he told IBD. "So they're not sure what the trade war will do."
Meanwhile, he echoed the view that Nvidia remains dominant.
"No one can beat them," he said. "They still have got an 18 to 24-month lead on everyone else. Unless someone in China announces that they've cracked the code on GPUs (graphics chips), no one's gonna worry. And unless there's a war on Taiwan that we don't know about, yeah that's an issue."
