Nvidia (NVDA) faced resistance at the 50-day moving average, falling over 1% on Monday. The stock had previously reached an all-time high of 152.89 following a breakout at 140.76 in October, but has since struggled with its recent lows.
Nvidia stock faces challenges amid rising competition and mixed signals
Nvidia has not issued a new sell signal, despite dropping more than 7% from its buy point and forming a double-bottom base with a buy point of 146.54. Investors should monitor the 126.86 level, as a drop below it could delay buying opportunities.
Shares have been pressured as news circulated about the upcoming next-generation Rubin chip at the CES tech conference on January 5. This followed a mixed news cycle regarding Nvidia’s competition, including a Chinese AI startup, DeepSeek, successfully training its AI model using Nvidia’s chips, matching capabilities of U.S. rivals such as Microsoft-backed OpenAI and Anthropic.
Nvidia has maintained a remarkable 177% gain this year after a dramatic 239% increase in 2023. However, funds have shown caution in buying the stock. While Nvidia’s price performance has outstripped that of 94% of other stocks in Investor’s Business Daily’s database, its Accumulation/Distribution Rating stands at D-.
The relative strength line, which gauges the stock’s performance versus the S&P 500 index, sharply declined after Nvidia peaked at 152.89 on November 21. Analysts recommend waiting for improvements in this metric before making investment decisions.
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Despite these pressures, shares climbed nearly 4% on December 20 after Morgan Stanley analyst Joseph Moore designated Nvidia as a “top 2025 pick,” although he adjusted his price target to 166 from 168. Moore detailed that delays in the older Hopper chip could allow more high-end memory chips for the upcoming Blackwell line to become available
Nvidia’s GPUs remain pivotal for AI tasks, with analysts noting that while custom ASICs are gaining market share, GPUs are still dominant for training applications. Mizuho analyst Jordan Klein indicated that “custom silicon will quickly gain share each year from GPUs, GPUs will be dominant for training purposes.”
Retail investors have heavily favored Nvidia in 2024, investing nearly $30 billion as of December 17, according to Vanda Research. The stock not only replaced Intel in the Dow Jones Industrial Average in November but also currently holds a market cap of $3 trillion, making it the second most valuable company after Apple.
Despite these successes, Nvidia faced setbacks following Broadcom’s results, which pointed to strong demand for its AI processors, suggesting increased competition in the AI market. Shares dipped further after Microsoft reported that it is not “chip supply constrained,” indicating a potential risk to Nvidia’s revenue, as one client represented 13% of its fiscal first-quarter revenue, believed to be Microsoft.
After Fed Chair Jerome Powell hinted at fewer rate cuts for 2025, Nvidia stock rose, supported by its strong profit margins. Citi analyst Atif Malik highlighted Nvidia’s capability to handle various workloads through its CUDA software as a substantial advantage over ASICs.
Nvidia reported third-quarter sales of $35.08 billion, with earnings of 81 cents per share, exceeding expectations. This performance came during a broader market noting signs of demand fluctuations, though ASML, a key chip lithography partner, insisted on maintaining strong long-term sales targets.
Analysts have mixed sentiments regarding Nvidia’s ability to maintain its growth trajectory amid rising competition. While some see long-term prospects as strong, others express caution after what they perceive as artificial inflation of demand due to double ordering practices within the semiconductor sector.
Experts like Doug Kass have indicated potential volatility in Nvidia’s share price, with projections suggesting a possible significant decline in the near term due to perceived overstated earnings caused by customer ordering strategies.
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Featured image credit: Nvidia
