Is the AI Darling Losing Its Shine?

Nvidia, the market’s darling of the generative AI revolution, just stumbled over its own hype. On September 3^rd, Nvidia stock dropped  2.7% to $169.56, which is their first close below the 50-day moving average since May. The company has been treated for months less like a chipmaker and more like a saint of artificial intelligence. 

But with the stock now falling beneath its 50-day moving average, investors are coming to understand that Nvidia’s chart seems to be more like a roller coaster, and not everyone has got a seatbelt.

This fall brings in a significant change in momentum, mainly considering the stock’s strong beginning at the start of 2025, when a golden cross drove shares to all-time highs around $200. 

With Nvidia positioned just above its critical $160 support area, technical traders are closely observing for indications of stabilization, or a further correction to $145, where the 100-day moving average lies.

Indications of Exhaustion

The retreat is complemented by accelerating volume, with over 230 million shares traded intraday, which is a testament to the heavy institutional movement. The technicals are flashing red, as both RSI and MACD have turned down, and a bearishly consuming pattern has appeared on the daily chart, which is a signal for further downside. 

The Bollinger Band emphasizes upon expectation of rising volatility in upcoming sessions. Unless Nvidia manages to retake the $171–$175 resistance level, short-term speculators can continue to liquidate holdings, which will further put pressure on the stock.

Valuations are Rebuilt

Nvidia’s fall is also part of a larger cooling of the AI trade that has swept markets for 18 months. Within four trading days, the company has shed more than $340 billion in market value, which is quite a reversal for what had been the symbol of the generative AI bull market. 

Investors are wondering if the company’s valuation is still reasonable, particularly as competition intensifies around the world. China’s expanding ambitions in AI chips, along with its ongoing U.S-China trade tensions, are burdening the overall sentiment and damaging the story of Nvidia’s supremacy.

Even solid fundamentals haven’t relieved the market jitters. The firm reported Q2 revenue of  $46.7 billion and initiated a $60 billion stock buyback plan, but shares fell as the data center revenue was slightly lower than expected. This response indicates that investors have factored in not only solid growth, but perfection.

Will New Chips Rekindle Momentum?

The forthcoming release of Nvidia’s Blackwell chip family can be the turning point. Bulls highlight that the huge gains in efficiency and performance can integrate Nvidia’s dominance in the AI training and data center sectors. 

As the expectations are very high, even a successful launch might not be sufficient to get the stock back to its highs without definitive acceleration in earnings or new breakthroughs in the market. Nvidia’s challenge now is less about demonstrating superiority and more about maintaining it under the increasing competitive and macroeconomic pressures.

Bottom Line

For the moment, Nvidia seems poised to settle back in between $160 and $175. A strong rally above $175 might encourage dip-buyers back into it, which will be able to position the stock for a move towards the $190-$200 range. On the other hand, a breakdown below $160 would initiate a steeper selloff down to $145-$150, which is an estimated 15%-20% correction from recent peaks. 

Painful in the short run, such a retracement could set up a more solid base for long-term investors. The recent $340 billion market capitalization loss in four days illustrates how volatile investor sentiment is when perfection becomes the minimum standard.

Ultimately, Nvidia’s misstep is less about one poor trading day and more about the weight of being the market’s golden child. When a stock is priced for greatness in the long term, even a slight hint towards flaw can sound like thunder. 

Whether this is the beginning of a more profound correction or merely a healthy pause, Nvidia is being compelled to demonstrate that it can produce more than flashy headlines. It has to maintain earnings expansion, hold market share, and navigate a more saturated AI landscape. 

For committed bulls, a downturn could be a buying opportunity. For bears, it’s quite the evidence that even the strongest tech darlings can go through a rough patch as well.