Key Points:
- The slump had erased around $430 billion from Nvidia’s market value.
- Despite recent volatility, Nvidia’s long-term prospects and investor confidence remain strong.
- In recent sessions, Nvidia call options outnumbered puts by 1.4-to-1, indicating continued bullishness.
- Short sellers gained $4.97 billion during the three-session decline.
Shares of Nvidia (NVDA.O) surged nearly 7% on Tuesday, snapping out of a three-session decline that had wiped approximately $430 billion off the artificial intelligence chipmaker’s market value. The stock closed at $126.09, rebounding from a 13% loss that followed its June 18 close of $135.58. This drop occurred after a significant rally after the company’s 10-for-1 stock split on June 10.
“The bounce today is a normal technical bounce after a 15% drop in three days; you’re not going to go straight down every single day,” said Tom Hayes, chairman at Great Hill Capital in New York. He highlighted the strong fundamentals of Nvidia, noting, “It’s a great company, it’s a great CEO, and you have insiders selling three-quarters of a billion worth of stock just as retail investors were getting involved with the split.”
Nvidia’s remarkable ascent and status as the leading provider of chips for artificial intelligence applications have made it a symbol of this year’s tech-driven surge in U.S. stocks. Despite the recent dip, Nvidia’s shares have soared 154% this year, contributing nearly 30% to the S&P 500’s (.SPX) year-to-date return, up 14.6% as of Monday’s close, according to S&P Dow Jones Indices.
The recent selloff has alleviated some concerns about Nvidia’s valuation, which currently stands at approximately $3.1 trillion, down from a peak of about $3.3 trillion earlier this month. Tom Plumb, chief executive and portfolio manager at Plumb Funds, which counts Nvidia as one of its largest holdings, commented on the situation, stating, “It’s a normal correction for a company that has made a run and gotten a lot of publicity. Until there’s a confirmation that the actual business would justify the slowing of the momentum, I don’t think you’ve reached the all-time peak.”
Investor sentiment on Nvidia remained optimistic in the options market, although the recent price slide has introduced a degree of caution among traders. According to Trade Alert data, Nvidia call options, typically used to bet on a rising stock price, outnumbered puts by 1.4-to-1 over the last three sessions. This compares to a call-to-put ratio of 1.6-to-1 for the previous 10 sessions.
Short sellers, who profit from stock declines, have gained $4.97 billion over the past three sessions, based on data from Ortex Technologies. Meanwhile, retail investors appeared to have been buyers during the recent dip, according to Mario Iachini, senior vice president of Vanda Research, who tracks individual investor behavior.
