When the stock market rallied off the lows in mid-March, Nvidia (NASDAQ:NVDA) was one of the leaders. However, it also has been a leader on the downside, as shares have been pummeled. NVDA stock has fallen considerably from the recent high, down 25%.
As noted last week, Nvidia stock is enduring one of its worst trading stretches since March 2020. The bearish action has not been limited to just this company, though. Advanced Micro Devices (NASDAQ:AMD), Qualcomm (NASDAQ:QCOM) and other leading chip stocks have been under duress as well.
There are several reasons the industry hasn’t been doing its best lately. One reason? A possible neon shortage due to the Russia-Ukraine conflict. Some estimate that over half the world’s neon is produced by companies in Ukraine, a gas that is used for the lasers in the process of lithography — the production process for semiconductors.
However, how much the industry is impacted by the conflict is not yet known. Since Russia’s annexation of Crimea in 2014, many companies have stockpiled multiple months or quarters worth of supply. Additionally, others have made efforts to move production outside of this region.
Still, some estimates point to roughly 40% of “neon used in global semiconductor production today” comes from Russia and Ukraine.
Of course, it doesn’t help that the analysts have been piling onto Nvidia lately. They’ve cut their price target and flagged potential order cancellations as their reasoning. Further, the bear market in growth stocks isn’t helping matters.
While NVDA stock is getting some reprieve on Monday, it’s certainly not out of the woods just yet.
It continues to hover in the low $200s, down quite a bit from its recent highs and just above recent support around $209. Now it’s completely possible that Nvidia will find support in this area. After all, the stock has found support anywhere from $206.50 to $212 so far this year.
It would not be out of the question to see a quick pop — at least up to the declining 10-day moving average. However, bulls certainly can’t rule out a test of the sub-$210 area. For long-term investors, that would put NVDA stock down about 40% and may justify taking a position. Below $200 could usher in a test of the 21-month moving average, which was support during the March 2020 correction.
For now, these are the areas I’m keeping an eye on.
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.