By Chibuike Oguh
NEW YORK (Reuters) – Shares of Nvidia (NASDAQ:) rose nearly 7% on Tuesday, emerging from a three-session downward spiral that wiped out about $430 billion of the artificial intelligence chip maker’s market value.
Nvidia shares ended at $126.09, following a decline that saw them lose about 13% from their June 18 close of $135.58. The decline followed a rally that accelerated after a 10-for-1 stock split that took effect on June 10.
“Today’s bounce is a normal technical bounce after a 15% decline in three days; you don’t go straight down every day,” said Tom Hayes, chairman of Great Hill Capital in New York. “It’s a great company, it’s a great CEO, and you’ve got insiders selling three-quarters of a billion worth of stock just as private investors got involved in the split,” Hayes added.
Nvidia’s breathtaking rise and its position as the dominant supplier of chips supporting artificial intelligence applications have made it emblematic of the tech-driven growth of U.S. stocks this year.
Shares of Nvidia, which briefly became the world’s most valuable company last week, are up 154% this year and accounted for nearly 30% of the annual return as of Monday’s close, according to S&P Dow Jones Indices. The index is up 14.6% this year.
The recent sell-off helped ease some concerns about Nvidia’s valuation, which now stands at about $3.1 trillion, down from a high of about $3.3 trillion earlier this month.
“It’s a normal correction for a company that has had a run and gotten a lot of publicity,” said Tom Plumb, CEO and portfolio manager at Plumb Funds, which has Nvidia as one of its largest holdings. “Until there is confirmation that the actual cases would justify the slowing of momentum, I don’t think you have reached the all-time peak.”
Optimism about Nvidia has been evident in the options market, although the recent share price decline appears to have made traders more cautious.
Nvidia’s calls, which are typically used to bet on a rising stock price, outnumbered puts 1.4 to 1 over the past three sessions, Trade Alert data showed. That compared to a call-to-put ratio of 1.6 to 1 for the previous 10 sessions.
At the same time, Nvidia short sellers, who bet on share price declines, have gained a combined $4.97 billion over the past three sessions, according to data analytics firm Ortex Technologies.
Meanwhile, retail investors have likely been buyers of the stock during the recent dip, said Mario Iachini, senior vice president of Vanda (NASDAQ:) Research, which tracks individual investor behavior.
