Nvidia Winning Streak Shows Signs of Overheating as Shares Fall

(Bloomberg) — Nvidia Corp.’s record-tying streak of gains is poised to end after at least one technical signal flashed a warning that the stock’s rally is overheating.

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Shares of the Santa Clara, California-based company stalled Wednesday after climbing more than 20% during their latest 10-day winning stretch, adding nearly $220 billion in market value, according to data compiled by Bloomberg. This had propelled the stock’s relative strength index, a 0-100 gauge of bullish and bearish price momentum, above 70.

Such an elevated RSI level is generally considered a contrarian signal that a decline is imminent, because buying has gotten excessive. On Tuesday, the stock entered so-called overbought territory for the first time since July.

The most recent surge comes as technology stocks rebound amid cooling inflation and hopes that Federal Reserve interest rates have peaked. Nvidia also got an added boost as the company announced an update on its artificial intelligence processors.

“Nvidia’s story remains stronger than ever,” CFRA Research senior equity analyst Angelo Zino said.

Zino and his peers note that the faster-than-expected release of this new chip reflects the company’s desire to fend off any competition in this lucrative and high-demand AI category.

The stock, which has rallied 240% this year, dropped 1.2% after initially opening higher on Wednesday. The company is scheduled to report earnings on Nov. 21.

Investors’ appetite for the stock that’s dominating the AI trade this year is showing little sign of being satiated. However, not everyone’s bullish. Michael Burry’s investment firm was betting against a basket of semiconductor stocks that includes Nvidia, according to a regulatory filing Tuesday.

(Updates with stock moves throughout.)

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