Nvidia (NVDA) Plunges 3.15% as Earnings Rally Fizzles on AI Overvaluation Fears

Nvidia shares fell 3.15% in pre-market trading on November 21, 2025, signaling investor caution following a volatile earnings response. The drop came after a dramatic reversal in market sentiment that unfolded hours earlier, despite the chipmaker reporting record $57 billion in quarterly revenue and raising full-year guidance. While the results underscored robust demand for AI infrastructure, particularly in data center sales, the stock’s sharp intraday decline highlighted growing concerns about overvaluation risks in the AI sector.

The earnings-driven rally fizzled as investors reassessed the sustainability of AI-driven growth. Despite CFO Colette Kress highlighting $500 billion in near-term Blackwell and Rubin revenue visibility, skepticism persisted about whether current spending levels—much of it driven by OpenAI-backed initiatives—could justify lofty multiples. This anxiety rippled through broader tech indices, with the Nasdaq and S&P 500 erasing early gains as the day progressed. CEO Jensen Huang’s dismissal of a “bubble” failed to quell fears, as fund managers increasingly questioned if AI infrastructure spending was outpacing returns.

The selloff also reflected a broader market recalibration. ETFs heavily weighted in Nvidia saw initial relief rallies, but momentum faded as profit-taking and macroeconomic uncertainties—particularly around potential Fed policy—clouded outlooks. Analysts noted that while Nvidia’s 62% year-over-year revenue growth and 73.6% non-GAAP gross margin remain impressive, the stock’s recent performance underscores the fragility of momentum-driven valuations in a sector still grappling with long-term profitability challenges.

A hypothetical backtest strategy for Nvidia might prioritize key technical levels: a 100-day moving average at $182.50 and a critical support zone around $175. Position sizing could scale with volatility, using Bollinger Bands to gauge short-term momentum. Traders might also consider a risk-reversal options structure to hedge against continued sector rotation, given the stock’s sensitivity to macroeconomic shifts and AI demand cycles.