US equities hit fresh lows: NVDA stock under pressure

Nvidia stock (NVDA) is leading a slump in the Nasdaq and has helped to push the index to the lows of the day.

The high-flying chipmaker is among the most highly valued stocks in the world, and certainly the highest-valued big-cap tech company. It’s trading near 40x trailing sales and has been a major beneficiary of the AI boom.

Lately though, the hype around AI is fading and Nvidia may also be facing headwinds from US efforts to ban chip sales to China.

Earlier in the week, I highlighted a brewing breakdown and the potential for the shares to fall to $400. They’re at $408 now.

The question is whether Nvidia can drag down the entire index further. I don’t think it can by itself as AI isn’t going away and the order book is extremely deep. If Nvidia shares fall, it will likely be on its own as other megacap tech stocks aren’t nearly as richly valued.

What I worry about more is China and the soft economy and lack of stimulus there. Shares is Shanghai fell 2% on Friday as capital markets stimulus measures and liberalization measures weren’t as strong as hoped for. That’s been a consistent theme for most of the year as expectations for something to get the economy really moving are met with half-measures from Beijing.

Zooming out to the weekly chart on the Nasdaq, this will be the second week of selling in a row, barring a miracle turnaround. That comes though after a non-stop rally since the start of the year. There is some support nearby but you could make a case for a 38.2% retracement, which would be another 7% lower.

I’m not there yet personally but if oil prices keep on rising and the market begins to worry about inflation next year or the Fed misplaying its hand, then it’s certainly not out of the question.