On Monday, the stock price of American chip giant Nvidia (NVDA.US) plummeted, officially entering a correction zone. Meanwhile, other chip stocks performed remarkably well, driving the Nasdaq Composite Index to a new trading high. This phenomenon highlights the complex market sentiment towards the semiconductor industry and the divergence among individual stocks.
Nvidia Stock Declines, Enters Correction Zone
As the leader in the AI chip market, Nvidia's stock has risen 166% this year, benefiting from the demand for data centers and the trend of artificial intelligence technology. However, since December, the stock has cumulatively fallen 4.5%, retreating about 11% from last month's all-time high of $148.88, officially entering a technical correction zone. The market typically defines a correction as a decline of 10% or more.
Nvidia's stock weakness may reflect Wall Street investors beginning to take profits after a round of strong gains. Since the launch of ChatGPT at the end of 2022, Nvidia has benefited from its graphics processing unit's (GPU) critical role in the data center field, but the recent stock correction indicates a cautious market.
Broadcom Soars Against the Trend, Market Cap Surpasses $1 Trillion
In stark contrast to Nvidia's performance, Broadcom (AVGO.US) saw its stock price soar 11% on Monday to an all-time high. Last week's strong earnings report pushed the stock up 24%, with its market value surpassing $1 trillion for the first time, further boosting confidence in the semiconductor sector.
Kim Forrest, Chief Investment Officer of Bokeh Capital Partners, pointed out, "Broadcom's upbeat outlook may have attracted momentum investors seeking quicker growth targets." He stated that the phenomena of momentum rotation are evident in the market, and Broadcom's performance is a typical example of this.
Other Chip Stocks Show Mixed Performance, Signs of Rotation Evident
While Nvidia remains weak, other chip stocks generally strengthened. Micron Technology (MU.US) surged 6% as investors anticipate its upcoming quarterly earnings report this week; Marvell Technology (MRVL.US) and Lam Research (LRCX.US) rose by 3% and 2%, respectively; ON Semiconductor (ON.US) and TSMC (TSM.US) both edged up by about 1%.
Keith Lerner, Truist's Co-Chief Investment Officer, said, "The market acknowledges Nvidia's importance but is also looking for other beneficiaries." He noted that there have been multiple rotations within the tech sector, and although Nvidia is crucial to the AI infrastructure, companies like Broadcom are equally attractive.
Nasdaq Hits Record High, Market Divergence Raises Caution
Despite Nvidia's sharp decline, the Nasdaq Composite Index hit a record high on Monday, indicating that optimism about the semiconductor industry has not faded. However, some analysts warn that the divergence between leading stocks' declines and other components hitting new highs could be a potential warning signal for the market's health.
Overall, the correction of Nvidia's stock and Broadcom's strong performance reveal the market's structural divergence. While investors remain optimistic about the long-term prospects of the chip sector, they are also more focused on individual stock performance and valuation support. Market rotation may continue to dominate the trend in the coming period.
