NEW YORK (June 26): Shares in Nvidia surged nearly 7% on Tuesday, snapping out of a three-session tailspin that had erased about US$430 billion (RM2.02 trillion) from the artificial intelligence (AI) chipmaker's market value.
Nvidia's shares finished at US$126.09, after a tumble that saw them lose around 13% from their June 18 close of US$135.58. The drop followed a rally that accelerated after a 10-for-1 stock split that took effect on June 10.
"The bounce today is a normal technical bounce after a 15% drop in three days; you are not going to go straight down every single day," said Tom Hayes, the chairman of Great Hill Capital in New York. "It's a great company, it's a great chief executive officer, and you have insiders selling three-quarters of a billion worth of stock just as retail investors were getting involved with the split," Hayes added.
Nvidia's breathtaking rise and its position as the dominant provider of chips to support AI applications have made it emblematic of this year's tech-driven boom in US stocks.
Shares in Nvidia, which last week briefly became the world's most valuable company, are up 154% this year, and have accounted for nearly 30% of the S&P 500's year-to-date return as of Monday's close, according to S&P Dow Jones Indices. The index is up 14.6% this year.
The recent sell-off helped ease some worries about Nvidia's valuation, which now stands at about US$3.1 trillion from a high of about US$3.3 trillion earlier this month.
"It's a normal correction for a company that has made a run and gotten a lot of publicity," said Tom Plumb, the chief executive and portfolio manager of Plumb Funds, which has Nvidia as one of its largest holdings. "Until there's a confirmation that the actual business would justify the slowing of the momentum, I don't think you have reached the all-time peak."
Bullishness on Nvidia was evident in the options market, though the stock's recent share price slide appears to have made traders more cautious.
Nvidia call options, typically used to bet on a rising stock price, outnumbered puts by 1.4-to-one over the last three sessions, Trade Alert data showed. That compared to a call-to-put ratio of 1.6-to-one for the prior 10 sessions.
At the same time, Nvidia short sellers, who bet on declines in the stock, have gained US$4.97 billion in the past three sessions combined, according to data analytics firm Ortex Technologies.
Meanwhile, retail investors have likely been buyers of the stock on the recent dip, said Mario Iachini, a senior vice-president of Vanda Research, which tracks the behavior of individual investors.
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