Nvidia stock up 1.2% amid mounting fears of AI overvaluation

Highlights

- Nvidia remains technically vulnerable as investor concerns grow over inflated AI valuations.

- Michael Burry’s $187 million short position and weak U.S. labor data have added to bearish sentiment.

- While the stock holds above key support, risks of a deeper correction are rising.

Currently, the $185–$190 zone is acting as a key pivot range. A sustained move above $190 could trigger a retest of the $200 resistance, which has repeatedly capped upside attempts since mid-October. Failure to clear this level convincingly would likely keep the stock trapped in a sideways consolidation pattern. On the downside, support near $175 is crucial; a break below this floor opens the door to deeper losses, with the $160–$165 region offering the next major cushion, coinciding with the 200-day moving average.

The 50-day moving average, currently around $186, is now being contested. A clean close above this dynamic level would be a short-term positive, but recent wide intraday swings show that traders remain cautious. Momentum indicators such as the RSI and MACD are neutral to slightly bearish, reflecting the stock’s ongoing struggle to reestablish a clear trend. Volume has spiked during down days, signaling potential distribution rather than accumulation—a bearish sign for medium-term investors.

Nvidia stock price dynamics (September 2025 - November 2025). Source: TradingView

Technically, Nvidia remains in a long-term uptrend, but the short-term setup has weakened. A break above $200 would signal a resumption of the bullish trend, whereas a sustained drop below $175 would confirm a breakdown from the current range and potentially trigger a medium-term correction.

Wall Street caution mounts as AI valuations

Wall Street's attitude toward artificial intelligence valuations shifted notably last week, dragging Nvidia into the center of a broader market reappraisal. A growing chorus of analysts and investment banks has begun sounding alarms about overstretched valuations in the AI sector, warning that expectations may have run ahead of actual adoption and revenue realization. Nvidia, widely viewed as the leading AI hardware supplier, was hit particularly hard by this sentiment reset, with its stock falling sharply in response to increasing skepticism about how sustainable current growth projections really are.

Adding fuel to the sell-off, Scion Asset Management, led by famed investor Michael Burry, revealed a $187 million notional short position in Nvidia through put options. Burry’s track record—most notably his prescient bets ahead of the 2008 financial crisis—adds weight to the move and may have spooked institutional investors. His bet was widely interpreted as a signal that Nvidia’s valuation may be vulnerable to a re-rating, particularly if AI growth slows or competition intensifies. Given Nvidia’s massive year-to-date run-up, the move underscores rising concern that the stock may have limited upside left in the near term.

Macroeconomic conditions are compounding the pressure. A report from Challenger, Gray & Christmas showed U.S. layoffs surged to 153,000 in October—the highest monthly figure in 22 years—raising red flags about the broader labor market. Meanwhile, consumer sentiment has deteriorated sharply, with the University of Michigan's index falling to its weakest level since 2022. While Nvidia briefly rebounded Friday amid optimism over a possible budget deal to avert a government shutdown, the volatility highlights how sensitive the stock has become to macro signals. In the months ahead, Nvidia's valuation is likely to hinge as much on broader economic conditions as it is on company-specific performance.

Bearish skew builds as technical and macro risks intensify

Given the heightened volatility, fresh macroeconomic pressure, and growing skepticism around AI valuations, Nvidia now faces a more precarious short-term outlook. The previous base case scenario of range-bound trading between $170–$200 is still in play, but the risk balance has tilted bearishly. We now assign only a 45% probability to this consolidation scenario. Under this view, Nvidia holds the $175–$185 range while markets digest the impact of slowing AI investment enthusiasm, high-profile bearish bets, and mixed macro signals.

The bullish scenario—previously assigned a 25% probability—has weakened further. With Michael Burry's $187 million put position signaling possible overvaluation, and layoff and sentiment data pointing to macroeconomic softening, we downgrade the probability of a clean breakout above $200 to 20%. For this scenario to materialize, Nvidia would need a decisive catalyst such as a surprise earnings beat, favorable regulatory developments regarding China, or a new AI-driven revenue stream that re-energizes institutional demand. Only then could the stock challenge the $220–$230 resistance band with conviction.

Nvidia's recent pullback aligns with political headlines after a Trump-aligned official stated there would be “no federal bailout” for AI firms. The remark triggered a sector-wide sentiment shift, with Nvidia leading the tech declines.

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