Dance Go On or Reversal? What History and Technical Analysis Say When Nvidia Hits the Trillion Milestone

Nvidia briefly touched a $4 trillion market cap on Wednesday, becoming the first-ever tech giant to achieve this milestone, as investors continue chasing the AI frenzy and optimism surrounding advanced AI applications, future autonomous systems, and even robotics demand. However, the more critical question is whether the momentum can sustain or if a reversal could soon follow. Here's what history and technical analysis say about it.

Nvidia’s blockbuster performance is largely thanks to the launch of ChatGPT in late 2022. Since then, more tech giants have joined the AI race, relying on Nvidia’s GPU for training and inference, with demand growing explosively. The GPU giant first crossed the $1 trillion mark on May 30, 2023, reached $2 trillion on March 1, 2024, and hit $3 trillion on June 5, 2024. In just over two years, its market value has quadrupled.

To be more specific, the stock took 9 months to climb from $1 to $2 trillion (a 100% return), about 3 months from $2 to $3 trillion (50%), and 1 month to hit $4 trillion (33%). While the percentage return has narrowed, it has taken increasingly longer for the stock to break new highs, as investors need more time to digest whether the stock is still worth chasing. Even though reaching the $5 trillion mark represents just a 25% upside, it may take at least another year to get there, as upside potential becomes more limited and downside risks grow.

Short-term traders, on the other hand, may still drive some of the mania, but corrections can quickly follow—often signaling the peak and rapid fade of retail enthusiasm.

Let’s take the $3 trillion milestone as an example. The stock jumped 5% with an “open high, close higher” pattern on June 5, 2024 (Wednesday), to break $3 trillion, and opened even higher (~2.45%) on Thursday. But it soon reversed, closing 1.18% lower. After a few days of consolidation, it stretched further over the next two weeks, peaking on June 20. Eventually, enthusiasm collapsed as the market retreated, and the stock tumbled 14% in 3 days, followed by further decline.

A similar pattern occurred at the $2 trillion mark. Nvidia shares continued to climb after breaking the threshold on March 1, 2024, stretching further for 3 days before suddenly dropping 5%. This marked the beginning of a consolidation period, with shares down 21% over the following month as the broader market pulled back.

These milestones reflect a recurring pattern: momentum often carries the stock further as more investors join the ride. But as optimism becomes excessive, correction risks grow and can last longer. The stock may quickly erase prior gains, enter consolidation, and eventually return to being fundamentally driven.

It wouldn't be surprising to see this happen again. Although the stock reached a record high, the enthusiasm isn't overly extreme. For example, the RSI closed at 77—bullish, but not in extremely overbought territory—suggesting more upside potential. Meanwhile, the upward pattern in MA(3,7,10) also indicates a solid technical setup. Still, as more investors pile in, the risk of a pullback looms—typically within 2 to 4 weeks. The extent of the correction may depend on how aggressively the stock rallies in the short term, especially if retail or institutional investors start taking profits. The market cap could return to the $3+ trillion level before fundamentals take the lead again, as belief in AI continues to drive Nvidia forward.

As the stock consolidates at the $4 trillion level, investors should brace for more struggle in price action while waiting for new catalysts to drive it higher. More importantly, as Nvidia becomes more valuable, its weight in major indexes grows heavier. This means if Nvidia sees a significant pullback, the broader market could face similar risks. The company’s valuation now hinges on optimism around AI and its applications, increasingly tied to other tech giants like Microsoft, Amazon, and Google.