TLDR
- Nvidia stock dropped 0.8% to $176.29 in premarket trading Friday
- Concerns grow over circular investment deals including $100 billion OpenAI partnership
- Stock briefly fell below 50-day moving average Thursday before recovering
- AI chip peers AMD and Broadcom also declined in early trading
- Barclays maintains buy rating with $240 price target despite pullback
Nvidia stock faced headwinds Friday morning, declining 0.8% to $176.29 in premarket trading. The drop follows the AI chipmaker’s record high of $184.55 set Monday.
The semiconductor giant isn’t alone in its struggles. Advanced Micro Devices fell 1.1% while Broadcom dropped 0.7% in early trading.
Market participants are questioning the sustainability of recent AI investments. Nvidia’s up-to $100 billion investment in OpenAI has sparked particular scrutiny.
The deal structure raises eyebrows because much of Nvidia’s investment is expected to return through chip purchases. Critics view this as potentially circular financing that may not represent genuine market demand.
“Toppy markets after the record high on Monday met some indigestion of Nvidia’s $100bn ‘investment’ in OpenAI,” said Saxo Markets strategist Neil Wilson.
Technical Weakness Emerges
Thursday’s session revealed cracks in Nvidia’s technical picture. The stock briefly dropped below its 50-day moving average after market open.
This breakdown represents a bearish signal for technical traders. However, Nvidia recovered to close Thursday up 0.4% at $177.69.
The recovery showed resilience but couldn’t mask the underlying pressure. Nvidia has fallen 3.6% from Monday’s peak over just two trading sessions.
Mizuho Securities analyst Jordan Klein called the pullback a “modest reset and wake-up call.” He suggested investors consider taking profits after September’s steep gains.
Other AI-exposed stocks including Astera Labs, Credo Technology, and Micron Technology have also retreated recently.
Analyst Sentiment Remains Strong
Despite recent volatility, Wall Street maintains confidence in Nvidia’s prospects. Barclays analyst Tom O’Malley raised his price target to $240 from $200 Thursday.
O’Malley cited over $2 trillion in planned AI infrastructure investments. He sees Nvidia as the primary beneficiary of this massive spending wave.
The bullish thesis extends beyond Nvidia. O’Malley believes rivals AMD and Broadcom will also benefit from accelerating AI adoption.
Adoption Data Shows Promise
UBS Global Wealth Management remains optimistic about AI’s trajectory. The firm points to U.S. Census Bureau data tracking over one million American companies.
The survey shows steady improvement in AI adoption rates across businesses. UBS believes the industry is entering a new growth phase with faster penetration.
Nvidia maintains a perfect IBD Composite Rating of 99, reflecting strong fundamental and technical metrics. The rating system evaluates earnings growth, price performance, and trading volume.
The stock’s recent weakness comes after a strong September rally that pushed shares to new heights. Friday’s premarket decline suggests investors are taking a more cautious approach to AI investments.
