Nvidia hot streak snapped as AI-fuelled rally hits a pause
- Shares of the darling of this year’s AI-fuelled rally fell 1.6 per cent Wednesday, ending a 10-day winning stretch
- The faster-than-expected release of Nvidia’s new chip reflects the company’s desire to fend off any competition in the AI category
Nvidia’s record-tying streak of gains ended after a technical signal flashed a warning sign and the unveiling of a competing artificial intelligence (AI) chip.
Shares of the darling of this year’s AI-fuelled rally fell 1.6 per cent on Wednesday, ending a 10-day winning stretch that matched the Santa Clara, California-based company’s previous record.
During the rally, shares added 22 per cent and nearly US$220 billion in market value, according to data compiled by Bloomberg. This propelled the stock’s relative strength index, a 0-100 gauge of bullish and bearish price momentum, above 70.
Such an elevated relative strength index level is generally considered a contrarian signal that a decline is imminent, because buying has become excessive. On Tuesday, the stock entered so-called overbought territory for the first time since July.
Causing further consternation for Nvidia investors on Wednesday, Microsoft Corp unveiled its competing Maia 100 chip. Shares of the software giant ended the session down 0.2 per cent.
Before Wednesday’s drop, Nvidia shares had been fuelled by a technology stocks rebound amid cooling inflation and hopes that Federal Reserve interest rates had peaked. Nvidia also got an added boost when the company on Monday announced an update on its AI processors.
The faster-than-expected release of Nvidia’s new chip reflects the company’s desire to fend off any competition in this lucrative and high-demand AI category, analysts said at the time. Microsoft’s announcement shows that the competition is not far behind.