Nvidia stock has pulled back in the past four consecutive days. It has slumped from the all-time high of $243 to the current $230 as investors have remained cautious about the artificial intelligence boom. So, will the stock continue falling or bounce back as some of its portfolio companies flop?
Top Nvidia-backed companies are flopping
Nvidia has become one of the biggest investment companies this year. It has allocated substantial sums of money in both private and public companies.
A closer look at some of these investments are not doing too well recently as investors remain concerned about the AI bubble. SoundHound AI stock has tumbled to its lowest level since 2014. Marvell Technologies has dropped to $275 from the record high of $329.
Arm Holdings stock has tumbled by over 46% from its all-time high. Top neocloud companies like IREN, CoreWeave, and Nebius have tumbled. And last week, Firmus, an Australian company, decided to postpone its IPO as investors balked at its hefty valuation.
Most importantly, OpenAI, a company that Nvidia has invested billions of dollars in, is not doing as was expected. Its annualized revenue of about $50 billion is $20 billion lower than what analysts were expecting.
To be fair, some of the companies that Nvidia has invested in are doing well. For example, Lumentum stock jumped to a record high of $1,140 as investors reacted to a bullish outlook from management. The company said that its products were sold out through 2029.
Nvidia is considering buying Reflection AI
Meanwhile, there are reports that the company is considering making its biggest acquisition ever. According to FT, the company is in talks to acquire Reflection AI, a company building open-weight models. This would be a big buyout since it was last valued at over $25 billion in March. As such, the real buyout price will be much higher than that.
The company may decide to structure its buyout in different ways. It may decide to acqui-hire Reflection, where it buys its employees and licenses its product as it did with Groq. Groq’s employees sued it last week, saying that they were undercut.
Nvidia may also decide to invest in another funding round in the company. By doing that, it will retain a major shareholding when the company decides to go public.
The acquisition would come weeks after the company decided to acquire Hugging Face in a deal valued at over $13 billion.
Looking ahead, the next few weeks will be important for Nvidia as its top clients and suppliers release their results. Some of the most notable of these ones are its large clients like Microsoft, Alphabet, Meta Platforms, and Amazon.
Nvidia stock price technical analysis
Technicals are sending mixed signals about Nvidia. On the positive side, the stock sits above the 50-day and 100-day Exponential Moving Averages (EMA). It also remains above the Ichimoku and Supertrend indicators.
The risk, however, is that the stock has formed a rising wedge pattern, which is made up of two ascending and converging trendlines. These two lines often leads to a bearish breakout. If this happens, the next key target to watch will be at $210, its lowest level on September 14. On the other hand, a move above the resistance level of $243 will point to more gains.