Nvidia recently achieved a record-high stock price, fueled by CEO Jensen Huang’s compelling CES keynote on the “era of physical AI.” However, this surge was followed by a significant drop in market capitalization, highlighting a recurring pattern for Nvidia investors: “sell the news.”
Huang’s presentation showcased Nvidia’s ambitious vision for AI’s integration into physical systems, including robotics and autonomous vehicles. He emphasized partnerships with major automakers and the potential of AI-powered platforms like Cosmos and DRIVE Hyperion. This optimistic outlook initially drove the stock to new highs.
However, the subsequent market reaction demonstrated a familiar trend. Following the initial excitement, investors engaged in profit-taking, leading to a substantial decline in Nvidia’s valuation. This “sell the news” phenomenon has been observed in previous instances following Nvidia’s earnings releases and significant announcements. For example, after reaching a record high in November 2023, the stock experienced a 13% drop. Similarly, a surge to $140 in June 2024 was followed by a 27% sell-off.
This pattern underscores the challenges faced by even the most successful companies in maintaining momentum after periods of heightened expectations. While Nvidia remains a dominant force in the current bull market, its history suggests that periods of rapid growth can be followed by significant corrections.
Paul Meeks, chief investment officer at Harvest Portfolio Management, a long-time Nvidia bull, suggests that a sequential slowdown in Nvidia’s growth rate would be a more concerning indicator than short-term market fluctuations. He believes that Nvidia’s long-term potential remains strong, even predicting its inevitable rise to a multi-trillion-dollar valuation in the coming years.
In conclusion, while the recent “sell the news” event impacted Nvidia’s stock price, it doesn’t necessarily negate the company’s long-term prospects. The recurring pattern highlights the importance of evaluating a company’s fundamentals and growth trajectory rather than solely relying on short-term market sentiment. For long-term investors, short-term volatility may present buying opportunities, while those focused on short-term gains should be wary of the cyclical nature of market enthusiasm.
