The recent slump in $NVIDIA(NVDA)$’s share price is part of a broader market correction, particularly affecting the tech sector, which has been in a prolonged bull run. The selling is being driven by several factors, and whether this pullback will last until its next earnings report on August 27, 2025, is a key question for investors.
I am holding Nvidia for long term so this pullback does not really require me to DCA, but I can play the options to take advantage of this pullback, will share more when I planned to trade the option.
If we looked at the $iShares Semiconductor ETF(SOXX)$ daily chart, it is near the 12-EMA level, though the bulls are in control, they might have some hard time trying to defend this level. The pullback is more obvious when we looked at the monthly EMA.
The monthly SOXX is trading too far away from the infamous 12-EMA, which mean that we could be seeing a correction and pullback, when the price would tend to move towards or near the 12-EMA, else this would be a bearish downside movement of the SOXX.
As we know that Nvidia is one of the major component in the SOXX, the pullback or correction would have significant impact on Nvidia, which I will explain in later section based on the 12-EMA.
Here is an analysis of the situation:
Why the Pullback is Happening
Market-Wide Correction and Rotation: The current sell-off is not unique to Nvidia. It's a "market wrap" where investors are taking profits from the tech and "Magnificent Seven" stocks that have seen incredible gains, largely due to the AI boom. This is a classic market rotation, with money flowing into more defensive and value-oriented sectors.
Concerns About AI Yield: While demand for AI is undeniable, some analysts and investors are raising concerns about the "yield" on AI investments. The enormous capital expenditure on AI infrastructure (like Nvidia's GPUs) hasn't yet translated into a clear and widespread return on investment for many companies. This is causing some to question the sustainability of the hyper-growth narrative for AI-related stocks.
Jackson Hole Uncertainty: The market is nervous ahead of the Jackson Hole Economic Symposium. Fed Chair Jerome Powell's speech on Friday, August 22, could provide clues about the future path of interest rates. Higher-for-longer rates are a negative for growth stocks like Nvidia, as they make future earnings less valuable and increase the cost of capital.
Valuation Concerns: After its massive rally, Nvidia's valuation is stretched by traditional metrics. While many analysts argue its forward-looking growth justifies the price, some investors may feel the stock has run too far, too fast, making it susceptible to profit-taking and corrections.
Will the Pullback Last Until Earnings?
The duration of the pullback is highly dependent on a few key variables, but there is a strong possibility that the volatility will continue until the earnings report on August 27, 2025.
Jackson Hole is the Immediate Catalyst: The market's reaction to Powell's speech on Friday will be the most significant factor in the immediate term.
If Powell is Hawkish: A strong hawkish stance could confirm fears of a higher-for-longer interest rate environment, which would likely extend the tech sell-off and could push Nvidia's price lower.
If Powell is Dovish: A dovish tone could spark a "relief rally" across the board, potentially halting the tech rotation and pushing Nvidia's price back up. However, it's unlikely to fully erase the recent losses.
If Powell is Neutral: This is a likely scenario. A balanced or non-committal speech would mean that the current uncertainty persists, and the market continues its consolidation or gradual decline, leading the pullback to last until the next major catalyst.
Earnings Report as the Next Major Hurdle: Nvidia's earnings report is the next big event that could fundamentally change the stock's trajectory.
Analyst Expectations are High: The consensus earnings per share (EPS) forecast is high, and analysts have been consistently revising their price targets for Nvidia upwards. The market is expecting another stellar report.
High Bar to Clear: Nvidia must not only beat expectations but also provide a very strong guidance for the next quarter. Given the high expectations, any sign of slowing growth or a cautious outlook could lead to a significant sell-off, regardless of a good earnings beat.
The "Yield" Question: The key focus will be on the company's commentary about its customers' return on investment for AI hardware. Any signs that the "picks and shovels" phase of the AI gold rush is showing signs of cooling off could be a major negative for the stock.
Infamous 12-EMA Suggest Nvidia Pullback Might Continue Post Earnings
On Tuesday (19 Aug), we saw Nvidia went down by 3.5% a big flush and almost undoing the daily upside. Now the 171 is our daily higher low.
We need to understand that it has been a very nice daily uptrend so far. From what I observed it seem like it wanted to go lower, while we were looking for some higher lows to be set.
The bears are in nice control, and they had make a nice move to the downside. What we can take away from yesterday pullbacks is when they come, they come hard, and sometime without any justified reasons. So we need to understand that it is not always a good proposition to chase things perpetually. And not to chase things at the highs.
As of yesterday, we have lost the 12 MA on the daily, something which has not happened in 3 to 4 months. Nvidia have earnings next week, but question we need to ask ourselves is will we be able to get it back after the earnings? We might want to monitor till the earnings date but if that does not happen, we could see Nvidia move a bit lower.
The key level for the bulls to regain is the 12-EMA, in the event, we saw NVDA go further down into the range between 12-EMA and 26-EMA, then we might see NVDA move more downside post earnings.
For a stock that has moved literally 100% in the last quarter, I believe investors might be expecting some weekly consolidation, in fact a very healthy weekly consolidation, but we need to keep in mind that the weekly might be looking for some consolidation.
The good news is the bulls are in control and have lots of space, for anything above 142, and looking for a new weekly higher low.
Monthly Timeframe
We need to be aware that the pullbacks yesterday might not be one-off event, we could be seeing multiple episodes happening as we approach September. So in the event of NVDA further pullback, we could probably be going down to the 140 to 150 region but do understand that this is not saying that 100% it will go down there. But do not buy it there yet.
I feel that as investors it is important for us to wait for other opportunities that give us good pullbacks.
I am looking for opportunities every week, but we need to be aware and keep track of how NVDA monthly MA have been moving as it is currently far away from the infamous 12-EMA level.
Nvidia Manage A Modest 0.22% After Hours On 20 Aug Post FOMC Meeting Minutes
Even though we saw Nvidia gain a 0.22% modestly, the risk of further pullback is still there, as Nvidia is still far from the infamous 12-EMA level, unless we can see a very strong earnings which could shift this trend.
Summary
Given the current market correction, the upcoming Jackson Hole meeting, and the high bar set for its earnings, it is very plausible that the pullback in Nvidia's stock could last until its earnings report on August 27. The period leading up to earnings will likely be marked by high volatility, as investors position themselves for what could be a make-or-break moment for the AI giant's short-term share price performance.
The stock's ultimate direction will depend on whether its earnings and forward guidance can justify its premium valuation and address the growing concerns about the real-world profitability of AI for its customers.
Appreciate if you could share your thoughts in the comment section whether you think Nvidia pullback might continue after its earnings results, unless the semiconductor sector show signs of recovery.
@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire @MillionaireTiger appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.
Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.
Comments