Nvidia (NVDA) and other momentum stocks face a make or break moment as the bull market in U.S. equities shows signs of cracking, says Wolfe Research.
Rob Ginsberg, a technical strategist at Wolfe Research, says that sentiment towards the momentum trade that has been led by stocks such as Nvidia and other mega-cap tech names appears to be fading amid mounting evidence that the U.S. economy is slowing.
Ginsberg notes that the iShares MSCI USA Momentum Factor ETF (MTUM) has declined 2% over the past month as a selloff across U.S. markets accelerates. The fading momentum, particularly among tech stocks, makes Nvidia’s financial results on Feb. 26 all the more important and could serve as a defining moment for the bull market that has been ongoing for two years.
“More pain is likely before these momentum names find their footing,” wrote Ginsberg in a note to clients.
AI Trade Unwinds
Several mega-cap tech stocks that have led the artificial intelligence (AI) rally over the past year have fallen since the emergence of Chinese AI app DeepSeek in late January. Over the past month, NVDA stock has fallen 8%, while Amazon (AMZN) has declined 9%, and Alphabet (GOOGL) has dropped 10%.
At the same time, the broader stock market is grappling with rising trade tensions, U.S. President Donald Trump’s continued threats to impose tariffs on imports, evidence of rising inflation, and the likelihood that interest rates will remain elevated longer than had been expected.
Ginsberg said that Nvidia could right the ship for the momentum and AI trades with its fourth-quarter 2024 financial results that are expected after the market closes on Feb. 26. But any weakness in Nvidia’s numbers or forecast and the current selloff could worsen.
Is NVDA Stock a Buy?
Nvidia’s stock currently has a consensus Strong Buy rating among 33 Wall Street analysts. That rating is based on 31 Buy and two Hold recommendations assigned in the last three months. The average NVDA price target of $179.77 implies 41.84% upside from current levels.
