Why did Nvidia (NVDA) stock slide 7% last week?

Nvidia stock remains under pressure as stocks sold off on Friday.
Semiconductor stocks are under pressure from increasing protectionist measures.
NVDA stock is down 62% YTD.

Ivan Brian FXStreet

Nvidia (NVDA) stock fell sharply again on Friday as selling pressure resumed for US equity markets. Thursday saw a huge rally after another hot CPI report showed inflation is getting stickier by the month. However, position and sentiment proved overdone, and a massive short covering and squeeze followed. Friday saw a return to the norm though with equities coming under heavy selling pressure as the 10-year yield once again breached 4%. NVDA stock fell 7% on Friday to close at $112.27.

NVDA stock news

Semiconductors are suffering in the wake of geopolitical tensions between the US and China. Truly it seems the era of globalization is over, and we are headed into increasingly protectionist regimes. The latest saga is the announcement from the US that limits semiconductor chip shipments to China due to concerns over national security. Chip makers will need to first obtain a license from the Department of Commerce to export certain types of chips. Nvidia has already stated that it does not believe the restrictions will be of much concern.

"We don’t expect the new controls, including restrictions on sales for highly dense systems, to have a material impact on our business," Nvidia said in a statement. However, Wall Street was not so sure, and just in case NVDA stock sold off to the tune of 8% on the announcement and followed it up with another 3% loss the following session. NVDA stock is down approximately 14% since the announcement. Bank of America said in a note that it felt Intel (INTC), Nvidia, and Lam Research (LAM) were most at risk from the China restrictions. Intel is lower by approximately 8% since the restrictions were announced.

Nvidia stock forecast

We need to take a step back from this one and look at the weekly chart, because the move higher was so extreme. Now like most pandemic beneficiaries, it seems NVDA stock is destined to retrace back to its pre-pandemic high below $80. The 7-month-long consolidation zone at $120 to $140 from September 2020 to April 2021 has now been broken. This is a key support zone, or was it?

We are now in a volume gap below $70! Earnings season could provide a short-term bear rally, but overall the technical picture looks grim here. To change the narrative, NVDA share price first needs to move quickly back to $120 and so prove the break was a false one. Then stabilize and push toward resistance at $193 – the double top from August.

NVDA weekly chart

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Author

Ivan Brian

FXStreet

Ivan Brian started his career with AIB Bank in corporate finance and then worked for seven years at Baxter. He started as a macro analyst before becoming Head of Research and then CFO.

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