Nvidia Plummets 2% Amid Underownership Concerns and Sector Turbulence: What’s Next for the AI Giant?

Summary
• Nvidia (NVDA) slumps to $172.13, down 2% from its 52-week high of $184.48
• Morgan Stanley highlights NVDA as the most underowned megacap stock in institutional portfolios
• Melius Research forecasts a $9 trillion valuation by 2030, citing AI infrastructure demand
• Semiconductors sector under pressure, with AMD also down 2.4%

Nvidia’s sharp intraday decline has captured market attention, with the stock trading near its 20-day low of $168.80. The move follows a confluence of factors: institutional underownership, geopolitical risks, and sector-wide volatility. As the AI chipmaker’s fundamentals remain robust, traders are now parsing technical signals and options activity to gauge the next catalyst.

Institutional Underownership and Sector Weakness Fuel NVDA’s Slide
Nvidia’s 2% drop is driven by Morgan Stanley’s analysis highlighting its status as the most underowned large-cap tech stock in institutional portfolios. Despite a 33% gain in 2025, NVDA’s 7.37% S&P 500 weight is only matched by 4.2% in active institutional holdings—a 2.41 percentage point gap. This underownership, combined with sector-wide selloffs (AMD down 2.4%), reflects investor caution amid geopolitical risks (China export licenses) and supply chain constraints. Meanwhile, Melius Research’s bullish $9 trillion valuation target contrasts with short-term volatility, creating a tug-of-war between long-term optimism and near-term profit-taking.

Semiconductors Sector Under Pressure as AMD Trails NVDA’s Slide
The semiconductors sector is broadly weaker, with Advanced Micro Devices (AMD) down 2.4%, underscoring sector-wide fragility. While NVDA’s AI-driven growth narrative remains intact, its peers are struggling with cyclical demand shifts and margin pressures. Intel’s recent $2 billion investment from SoftBank and U.S. government stake discussions highlight alternative capital flows, but NVDA’s dominance in AI infrastructure keeps it insulated from immediate sector headwinds. However, the underownership gap suggests institutional investors may eventually rebalance, potentially supporting a rebound.

Options and Technicals: Navigating NVDA’s Volatility with Precision
• MACD: 4.41 (bullish divergence from signal line 5.59)
• RSI: 44.19 (oversold territory)
• Bollinger Bands: Lower band at $171.21 (near current price)
• 200-day MA: $137.25 (far below current price)

Nvidia’s technicals suggest a short-term oversold condition, with RSI at 44.19 and price near the lower Bollinger band. The 200-day MA at $137.25 remains a distant support, but near-term focus is on the $170–$175 range. Two options stand out for bearish exposure: NVDA20250829P165 and NVDA20250829C170.

NVDA20250829P165 (Put, $165 strike, 8/29 expiry):
• IV: 59.92% (moderate)
• Leverage: 49.00%
• Delta: -0.305 (moderate sensitivity)
• Theta: -0.059 (slow decay)
• Gamma: 0.0205 (high sensitivity to price moves)
• Turnover: $4.6M (liquid)
• Payoff at 5% downside: $1.13 per contract
This put offers a high leverage ratio and strong gamma, ideal for a 5% drop scenario. Its moderate delta balances risk and reward.

NVDA20250829C170 (Call, $170 strike, 8/29 expiry):
• IV: 62.55% (moderate)
• Leverage: 20.32%
• Delta: 0.581 (moderate)
• Theta: -0.741 (rapid decay)
• Gamma: 0.0219 (high sensitivity)
• Turnover: $9.3M (liquid)
• Payoff at 5% downside: $0.00 (out of the money)
While the call is out of the money, its high gamma and liquidity make it a speculative play for a rebound above $170. Aggressive bulls may consider this into a bounce.

Action: Short-term bearish traders should prioritize NVDA20250829P165 for a 5% downside scenario. If $170 holds, consider NVDA20250829C170 for a rebound.

Backtest Nvidia Stock Performance
After an intraday plunge of at least -2%, NVDA has historically shown positive short-to-medium-term gains. The backtest data reveals favorable win rates and returns for 3, 10, and 30 days following such events:1. 3-Day Performance: The win rate is 43.10%, with an average return of 1.03% over 3 days. The maximum return during this period is 6.70%, achieved on day 59.2. 10-Day Performance: The win rate increases to 39.66%, with an average return of 1.41% over 10 days. The maximum return is 6.70%, still on day 59.3. 30-Day Performance: The win rate rises to 45.98%, with an average return of 3.44% over 30 days. The maximum return remains at 6.70%, achieved on day 59.These results suggest that NVDA often rebounds after a significant intraday plunge, making it a potential candidate for a bounce-back strategy, especially for traders looking to capitalize on short-to-medium-term fluctuations.

NVDA at a Crossroads: Underownership, AI Momentum, and Sector Dynamics
Nvidia’s 2% decline reflects a tug-of-war between institutional underownership and long-term AI-driven optimism. While Melius Research’s $9 trillion target underscores its potential, near-term volatility is likely to persist as investors balance geopolitical risks and sector-wide corrections. The $170 level is critical—break below it, and the 200-day MA at $137.25 becomes a distant target. Conversely, a rebound above $175.11 could reignite bullish momentum. With AMD down 2.4%, sector dynamics remain a key watchpoint. Act now: Position for a $170 pivot or a $175 breakout to capitalize on NVDA’s next move.