It has not been an easy run for Nvidia (NASDAQ:NVDA) lately. In fact, most semiconductor stocks have been struggling. So far on Monday, that skid has yet to come to a halt. NVDA stock is lower by more than 5%, as it looks set to decline for a fifth straight session. If Nvidia closes lower today, it will mark the eighth decline in the past nine sessions.
The latest culprit? A downgrade.
Baird analyst Tristan Gerra downgraded NVDA stock due to multiple concerns, cutting his rating from outperform to neutral. He also cut his price target from $360 to $225. He argued that there has been a decrease in PC demand and Nvidia risks cancellations of consumer GPUs, which he attributes to “excess inventories.” Further, he notes that Russian embargo sanctions are not being priced into the stock.
Overall, the tone on Wall Street remains optimistic given Nvidia’s long-term opportunities. However, analysts are also realistic about short-term issues. According to Gerra, PCs are one concern. For others, it’s automotive. It’s no secret that the automotive sector has faced more than its fair share of supply chain disruptions — some of which have come from semiconductors.
Not long ago, General Motors (NYSE:GM) had to idle some of its production due to a chip-supply issue. While automotive revenue is not the top sales unit for Nvidia, it’s still significant — and growing. The company generated more than $560 million in sales from this segment in fiscal 2022 and looks to grow that total as EV and AV technologies continue to grow.
Wheeling back to NVDA stock, it has been a painful stretch for shareholders. According to Dow Jones Market Data, this puts the stock at its worst five-day stretch since its 19.9% drop on March 16, 2020.
If we zoom out on the weekly chart, it’s clear that support has been in the low-$200s. That area is back in play now that NVDA stock failed to hold the 50-week moving average and the weekly VWAP measure.
At the same time, we’re seeing Advanced Micro Devices (NASDAQ:AMD) finally break below its key support level near $100. Will Nvidia soon do the same? It may, and if it does, it will put the 21-week moving average in play, which was a key support level in March 2020.
We don’t want to blindly buy the dip, but as NVDA stock nears a 40% pullback from the highs, it’s certainly one that long-term bulls want to have on their radar.
On the date of publication, Bret Kenwell held a long position in NVDA. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
