Nvidia’s stock has entered precarious territory, falling below its critical 200-day moving average for the first time since January 2023, following a dramatic market reaction to Chinese AI startup DeepSeek’s new model. The semiconductor giant’s shares have plummeted 16% this week, with a single-day loss erasing nearly $600 billion in market capitalization as investors reassess the AI chip landscape.
The 200-day moving average, currently at $122.28, serves as a crucial technical indicator that signals potential trend reversals. Nvidia closed at $119.70 on Thursday, marking a significant breach of this threshold. The stock has oscillated above and below this level throughout the week, suggesting make-or-break trading conditions that could determine the company’s near-term trajectory.
Technical analysts are divided on Nvidia’s outlook. Will Tamplin from Fairlead Strategies warns that the correction could deepen further toward $110, noting that momentum has turned negative in the intermediate term (two to four months). He observes that the stock hasn’t yet reached oversold territory, implying additional downside risk. From a long-term perspective, Tamplin suggests the primary uptrend may flatten into a trading range environment for 2025.
David Keller of Sierra Alpha Research highlights a concerning absence of “buy the dip” activity following Monday’s sharp decline. Rather than seeing an influx of buyers, the stock has remained within Monday’s trading range. Keller maintains a cautious stance, stating the chart remains “guilty until proven innocent” unless Nvidia can reclaim the $130 level.
Meanwhile, Ari Wald from Oppenheimer & Co. offers a more measured perspective, expecting Nvidia to enter a sideways consolidation phase rather than an immediate downtrend. He’s monitoring $140 as resistance and $100 as support, believing the stock will eventually resume its uptrend based on what he sees as a “middle-innings, growth-led, secular advance.” However, Wald recommends investors remain on the sidelines while the stock works through current excesses.
Ryan Detrick of Carson Group provides broader market context, noting that rotation out of chip stocks into sectors like transports and financials could actually be healthy for the overall bull market. He emphasizes that Nvidia faces high expectations when it reports earnings on February 26, needing strong results to justify its premium valuation amid the DeepSeek-induced uncertainty.
Key Quotes
NVDA is seeing a hard test of its rising 200-day MA, near $122. We think the correction is likely to deepen further toward secondary support at roughly $110.
Will Tamplin, senior analyst at Fairlead Strategies, warns that Nvidia’s technical breakdown suggests more downside ahead, with momentum turning negative in the intermediate term and the stock not yet reaching oversold levels.
Until and unless NVDA can regain the $130 level, we would consider this chart guilty until proven innocent.
David Keller, chief strategist at Sierra Alpha Research, expresses concern about the lack of buying support following the DeepSeek-triggered selloff, suggesting investors should remain cautious until the stock demonstrates clear recovery.
Typically, reversals out of a strong uptrend transition into a range rather than a downtrend meaning continued oscillations around the stock’s flattening 200-day average would be reasonable over the coming weeks to months.
Ari Wald from Oppenheimer & Co. offers a more balanced view, expecting Nvidia to consolidate sideways rather than enter a sustained downtrend, though he recommends waiting for the uptrend to resume before buying.
The bar is set quite high and these names need to report strong earnings to justify the current valuation. But at the end of the day, rotation is the lifeblood of a bull market.
Ryan Detrick of Carson Group contextualizes the selloff within broader market dynamics, suggesting that rotation out of overvalued chip stocks into other sectors could actually strengthen the overall bull market.
Our Take
The DeepSeek disruption exposes a vulnerability in the AI investment thesis that many overlooked: technological efficiency can disrupt hardware demand as effectively as new applications create it. Nvidia’s dominance has been predicated on the assumption that AI scaling requires ever-increasing computational resources. If DeepSeek’s approach proves replicable—achieving comparable results with significantly less hardware—it fundamentally challenges Nvidia’s growth trajectory and premium valuation. The technical breakdown is particularly significant because it reflects institutional repositioning, not just retail panic. However, it’s premature to declare Nvidia’s AI dominance over. The company’s CUDA ecosystem, established relationships with hyperscalers, and ongoing innovation in AI accelerators provide substantial moats. The upcoming earnings report will be pivotal—investors need reassurance that demand remains robust despite emerging efficiency gains in AI model training and inference.
Why This Matters
This development represents a critical inflection point for the AI industry’s economic narrative. Nvidia has been the primary beneficiary of the AI boom, with its GPUs powering most major AI models and data centers. The DeepSeek disruption—a Chinese startup reportedly achieving competitive AI performance with fewer resources—challenges assumptions about the capital intensity required for AI development and raises questions about Nvidia’s pricing power and market dominance.
The $600 billion single-day market cap loss signals investor concerns about potential commoditization in AI infrastructure and increased competition from international players. This could reshape capital allocation across the AI ecosystem, affecting everything from cloud providers to AI startups dependent on Nvidia’s technology. The technical breakdown below the 200-day moving average suggests institutional investors are reassessing their positions, potentially triggering broader market volatility in AI-related stocks. With Nvidia’s earnings approaching on February 26, the company’s guidance and commentary on competitive dynamics will be crucial for determining whether the AI infrastructure investment thesis remains intact or requires fundamental revision.
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