(Bloomberg) — Nvidia Corp.’s astonishing winning streak is on the verge of coming to an end as at least one technical signal suggests that the stock’s rally has become overheated.
Shares of the Santa Clara, California-based company hit a roadblock on Wednesday after a remarkable 10-day run that saw them surge more than 20%, resulting in a market value increase of almost $220 billion, as reported by Bloomberg. This surge pushed the stock’s relative strength index (RSI), a measure of bullish and bearish price momentum on a scale of 0-100, above 70.
An RSI level this high is often seen as a sign that a decline is imminent, indicating excessive buying. On Tuesday, the stock entered “overbought” territory for the first time since July.
This recent surge in the stock comes at a time when technology stocks are bouncing back amid easing inflation and optimism that Federal Reserve interest rates have reached their peak. Nvidia also received a boost from the announcement of an update on its artificial intelligence processors.
According to Angelo Zino, senior equity analyst at CFRA Research, “Nvidia’s story remains stronger than ever.” Zino and his colleagues believe that the swift release of the new chip reflects the company’s determination to stay ahead in the lucrative and high-demand AI category, fending off any potential competition.
Despite a 240% rally this year, the stock saw a 1.2% dip after initially opening higher on Wednesday. The company is set to release its earnings report on November 21.
While investors continue to show a strong appetite for the stock dominating the AI trade this year, not everyone shares the bullish sentiment. Michael Burry’s investment firm recently placed bets against a selection of semiconductor stocks, including Nvidia, according to a regulatory filing on Tuesday.
(Updates with stock moves throughout.)
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