Goldman: Nvidia (NVDA.US) has entered bear market, with multiple factors behind Tuesday's ~10% drop

NVIDIA (NVDA.US) shares closed down nearly 10% on Tuesday, wiping out $279bn in market value, the largest single-day loss in US stock history, according to Goldman's trading desk, which said the stock had fallen 23% from its intraday high on June 20, breaking below its 50-day and 100-day moving averages, which means the stock is now in bear market territory.

Goldman's trading desk said there were several reasons for the near-10% drop in NVIDIA on Tuesday, including:

Remaining performance-related investment impact — the company's EPS beat expectations by a smaller margin than in previous quarters, and its gross margin normalised;

Seasonal negative factors — semiconductor stocks have fallen every September since 2020, averaging a 4.6% monthly decline;

Reports that OpenAI is developing a new in-house AI chip;

Position adjustments by traders and portfolio managers during a busy period for industry data, such as Broadcom's (AVGO.US) earnings on Thursday;

An upgrade in the US Department of Justice's antitrust investigation into NVIDIA, which would not help sentiment.

NVIDIA's big drop on Tuesday also weighed on the semiconductor sector. The Philadelphia Semiconductor index closed down nearly 7.8%, its biggest drop since August 5's "Black Monday" and its second biggest of the year.

Peter Bartlett, a Goldman technology trader, said the semiconductor sector's rout was "the question we've been asked the most by clients so far". He acknowledged that, unfortunately, there was no satisfactory explanation yet for why the sector had started so badly this September.

Bartlett also noted that, while September had started badly, client feedback had not indicated "pain" levels were high, as clients' semiconductor positions had clearly shortened, for most investor types, especially hedge funds. Peter Callahan, Goldman's top TMT expert, said on Monday that the controversy around the AI theme had increased markedly compared with the previous two or three months.