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Nvidia Shares Surge Nearly 7% Following Market Rebound from $430 Billion Slump

Nvidia (NASDAQ:NVDA) saw its shares climb nearly 7% on Tuesday, reversing a three-day decline that had wiped out approximately $430 billion from the company’s market capitalization.

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Closing at $126.09, Nvidia’s shares had fallen around 13% from their June 18 closing price of $135.58, following a rally fueled by a 10-for-1 stock split effective on June 10.

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“This bounce today is a typical technical rebound after a 15% drop in three days; declines of that magnitude rarely occur continuously,” commented Tom Hayes, chairman at Great Hill Capital in New York. “Nvidia is a strong company with a great CEO, although recent insider selling of approximately three-quarters of a billion dollars coincided with retail investors becoming engaged following the split,” he added.

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Nvidia’s remarkable ascent as a leading provider of chips for artificial intelligence applications has made it a symbol of this year’s technology-driven surge in U.S. equities.

Year-to-date, Nvidia’s shares have surged 154%, contributing nearly 30% to the S&P 500’s return as of Monday’s close, according to S&P Dow Jones Indices. The index itself has gained 14.6% this year.

The recent market downturn has alleviated some concerns about Nvidia’s valuation, which had peaked at around $3.3 trillion earlier this month and now stands near $3.1 trillion.

“This correction is typical for a company that has experienced rapid growth and significant media attention,” remarked Tom Plumb, chief executive and portfolio manager at Plumb Funds, where Nvidia is among the largest holdings. “Until there is confirmation that the business fundamentals support a slowdown in momentum, I don’t believe we’ve reached the peak.”

Bullish sentiment towards Nvidia remained evident in the options market, although recent declines in the stock price have made traders more cautious.

According to Trade Alert data, Nvidia call options, typically used for betting on rising stock prices, outnumbered puts by a ratio of 1.4-to-1 over the last three sessions, compared to a ratio of 1.6-to-1 over the previous 10 sessions.

Concurrently, short sellers targeting declines in Nvidia’s stock have accrued $4.97 billion in gains over the past three sessions, as reported by data analytics firm Ortex Technologies.

In contrast, retail investors likely seized the opportunity to buy Nvidia shares during the recent dip, noted Mario Iachini, senior vice president of Vanda Research (NASDAQ:VNDA), which monitors individual investor behavior.

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