Nvidia shares face growing pressure despite AI expansion
Nvidia continues to strengthen its position in the artificial intelligence market through a new partnership model with cloud providers. Despite a strong fundamental backdrop, the stock remains under pressure as sentiment across the semiconductor sector continues to weaken.
The biggest recent development for Nvidia is the introduction of a new revenue-sharing model with AI cloud providers. Under the new framework, Nvidia will receive a share of the revenue generated by companies using infrastructure powered by its technology. This approach is expected to create a more stable stream of recurring revenue while reducing the company's dependence on the cyclical nature of hardware sales.
At the same time, pressure on the stock persists. Following the semiconductor sector's record-breaking quarter, investors have begun taking profits amid growing concerns about competition from custom AI chips being developed by Alphabet, Amazon, and other major technology companies. These concerns have become one of the key factors weighing on NVDA shares.
Nvidia risks another test of 200 SMA
NVDA recently tested its 200-day simple moving average (SMA) near $190, where buyers stepped in and triggered a short-term rebound. This scenario was outlined in our previous analysis and has now played out as expected.
The next key challenge for bulls is to reclaim the psychological $200 level. A successful breakout above this threshold would open the way toward the next resistance zone around $205.
However, given the current market sentiment, another retest of the 200-day SMA near $190 appears to be the more likely scenario. If this support fails, the decline could accelerate toward the next key support level at $184.60.
Sell the News remains Nvidia's biggest risk
Despite the launch of its new monetization model, Nvidia's valuation continues to depend primarily on the growth of its AI business. The challenge is that the market has already priced in further revenue expansion and the company's continued leadership in the semiconductor industry.
The biggest risk for Nvidia is not weak financial results, but rather exceptionally high investor expectations. Historically, following periods of extraordinary share price appreciation, even earnings reports that exceeded analyst forecasts have often been followed by profit-taking.
Against this backdrop, Nvidia's quarterly earnings report on August 26 could become the catalyst for another sell-the-news reaction if management fails to significantly outperform the market's already elevated expectations.
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