Nvidia Slide Underscores Volatility Stalking US’s Hottest Stock

(Bloomberg) -- The artificial-intelligence boom has made one of the hottest US stocks even more volatile than the largest cryptocurrency.

Nvidia Corp., whose stock-price had surged sharply as companies spend billions on its computer chips, slid 7% on Tuesday in its steepest drop in more than three months, wiping $193 billion from its market value.

The recent reversal of fortune — which has knocked its share price down 23% since July 10 — is underscoring a risk that didn’t matter when Nvidia’s stock price did nothing but go up: By one key measure, at least, it’s been roughly twice as volatile as Bitcoin.

Even with this month’s retreat, Nvidia is still up about 109% this year — more than any other stock in the S&P 500 but Super Micro Computer Inc., another company that’s benefitting from the flood of money being spent on equipment for AI applications.

But over the past two weeks, investors have pulled back from large tech stocks like Nvidia amid growing doubts about whether all that spending on AI will pay off. Instead, they’ve plowed into small-cap companies, which have cheaper valuations and will benefit once the Federal Reserve starts cutting interest rates.

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The shift has also pushed Nvidia’s stock toward a threshold that could indicate it has further room to fall, according to a gauge utilized by technical analysts who track trading patterns. The shares closed at $103.73 on Tuesday, just below the $103.81 100-day moving average — a move that may signal a downward trend for the stock.

“This is more pain than Nvidia is used to in last 8 months,” said Todd Sohn, ETF and technical strategist at Strategas Securities.

“It’s never fun when the best stocks correct like this,” Sohn said. “But to get some of the enthusiasm out of Nvidia and peers, it’s a necessary condition to happen — sort of a resetting of expectations and attitudes — that is ultimately going to be helpful.”