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What Happened to NVIDIA? Stunning CES Debut As Shares Dive!

AInvestTuesday, Jan 7, 2025 9:10 pm ET
2min read

At CES 2025, Jensen Huang captivated the audience with an electrifying keynote, unveiling NVIDIA's latest RTX series GPUs, Blackwell chips, and other innovations. The capital markets responded positively, with NVIDIA's stock price reaching a new all-time high at the market's opening yesterday.

However, the celebration didn't last long. Shortly after the opening bell, NVIDIA's stock tumbled, flipping into negative territory with no resistance from the bulls. By the end of the trading day, NVIDIA's stock had plummeted 6.22%, closing at $140.14 per share.  

Why Did NVIDIA's Stock Suddenly Drop?  Broad Market Pressure and Profit-Taking Are the Key Drivers

NVIDIA's sharp decline can largely be attributed to a combination of macroeconomic factors and investor profit-taking. 

Firstly, the broader market played a significant role in dragging down NVIDIA. Data released yesterday revealed that U.S. job openings in November hit 8.098 million, far exceeding expectations and marking a six-month high. Additionally, the December ISM Services Index rebounded to 54.1, outperforming forecasts. These indicators point to a stronger-than-expected U.S. economy combined with persistent inflation, causing the market to significantly revise its expectations for Federal Reserve rate cuts. Consequently, U.S. Treasury yields surged, pressuring equity markets.

All three major U.S. indices closed lower overnight, with the Nasdaq dropping nearly 2%. NVIDIA, as a tech bellwether, couldn't escape the downward pull of the broader market.  

Secondly, profit-taking among NVIDIA investors further exacerbated the decline. Some market commentators suggested that while Jensen Huang's CES keynote was passionate, it lacked substantial details and leaned heavily on "grand visions," failing to meet investors' expectations for near-term catalysts.  

During the keynote, Jensen's discussion of AI agents seemed to bore the audience, with many visibly disengaged, creating an awkward atmosphere.  

In terms of tangible deliverables, NVIDIA primarily showcased its RTX series GPUs and Blackwell chips. However, the RTX series' pricing fell short of market expectations, and the gaming segment is no longer a major driver of investor interest. Meanwhile, details on Blackwell chips, though significant, merely confirmed prior announcements of production and strong demand, offering little novelty compared to previous earnings calls.  

Professional options traders swiftly acted on a buy the rumor, sell the news strategy. Data shows a massive sell-off of NVIDIA call options yesterday. In early Tuesday trading, there were 600,000–700,000 open call options expiring on February 21, most of which were sold during the day. This marked the largest single-day sell-off of call options in the past 30 days, amplifying downward pressure on the stock price.

Analysts Remain Optimistic About NVIDIA's Long-Term Prospects  

While NVIDIA has experienced sharp single-day declines before, history shows that these moments often present excellent buying opportunities. Will this be the case again? Wall Street analysts remain bullish.  

Despite yesterday's plunge, analysts from Stifel, Wedbush, and Truist Securities reaffirmed their "Buy" ratings on NVIDIA. According to Yahoo Finance, the average analyst price target for NVIDIA over the next 12 months is $172.80, signaling substantial upside.  

NVIDIA continues to maintain a dominant position in the AI era, not just in data centers but also across client computing, autonomous vehicles, and robotics," said Truist Securities analyst William Stein.  

Wedbush analyst Daniel Ives expressed optimism following the CES keynote, stating: "After the event, we are even more positive about NVIDIA's overall AI strategy. Just its robotics and autonomous driving technologies could unlock incremental trillion-dollar opportunities over the next few years. We believe NVIDIA's market cap will surpass $4 trillion and potentially reach $5 trillion within the next 12 to 18 months."

Disclaimer: the above is a summary showing certain market information. AInvest is not responsible for any data errors, omissions or other information that may be displayed incorrectly as the data is derived from a third party source. Communications displaying market prices, data and other information available in this post are meant for informational purposes only and are not intended as an offer or solicitation for the purchase or sale of any security. Please do your own research when investing. All investments involve risk and the past performance of a security, or financial product does not guarantee future results or returns. Keep in mind that while diversification may help spread risk, it does not assure a profit, or protect against loss in a down market.