Nvidia stock is trading at six-month lows after a 1.6% decline today.
The chart is problematic as it bottomed near $170 three times since November but it's now broken that support and trading at the worst levels since September.
The chipmaker is now testing the September lows, which stretch down to $164. Should that break, we will be at the lowest since July 2025 and it would also trace out an ugly head-and-shoulders pattern.
While all eyes are on Iran at the moment, there is something of a reckoning ongoing in the AI space and software space. Tech shares have been underperforming all year and there's now broad pressure on the Mag 7 names. The fears are something of a barbell. One is that AI won't prove as valuable and transformative as expected, or at least not on a near-term timeline. The opposite fear is that it's so transformative that it undermines the employment market and leads to a recession, and huge political backlash.
There is also the question of AI architecture. Memory names this week have been beaten up after Google unveiled a new algorithm that could allow more efficient use of memory storage. The memory names had previously been some of the highest flyers in markets anywhere.
Note this chart of Micron, which was a market darling. This looks like a false breakout to the topside and now a reversal.
As for Nvidia, should the September lows give way, the measured target would be somewhere around $130. That number is somewhat hard to fathom even though we were there in June.
The consensus estimate for this year's earnings is $8.33 so that puts it at just 20x at current levels. At $130, it would be trading at just 15.6x in one of the fastest growing stocks in the world.
I suppose the fear could be that there will be a peak in earnings as several companies (perhaps X, MSFT or Meta) drop out of the AI race and leave it to Google, Anthropic and OpenAI. The money could also dry up for the intense spending on chips, which could undermine the forward outlook.
