Nvidia (NVDA) shares dropped on Monday, ending a four-day winning streak, following reports that Chinese tech giant Huawei Technologies is developing a rival artificial intelligence (AI) chip. The news, reported by The Wall Street Journal, suggests that Huawei’s new chip could potentially replace some of Nvidia’s high-performance products, having already approached several Chinese tech companies to test its technical feasibility.
Nvidia’s stock has been under pressure in recent months due to concerns over cheaper AI technology emerging from China and a federal crackdown on the export of Nvidia’s popular H20 chips to China. Despite this, Nvidia shares are up about 25% from their early-April low. However, they have lost around a fifth of their value since the start of the year as of Monday’s close.
Technical Analysis of Nvidia’s Chart
Nvidia shares continue to oscillate within a falling wedge pattern after a bear trap emerged on the chart earlier this month. The price has recently pushed up against the pattern’s upper trendline, potentially setting the stage for a bullish breakout. The relative strength index (RSI) has also crossed back above the 50 threshold, indicating improving price momentum.
Key Resistance Levels to Watch
A breakout above the falling wedge’s upper trendline could initially see Nvidia shares test the $115 level, a potential resistance area near the April swing high. Buying above this level may trigger a move up to around $130, near last year’s prominent August peak and December trough. Investors who have bought shares at lower prices may look to exit in this region.
Crucial Support Levels to Monitor
On the downside, a move lower could lead to a retest of support at $96, near last week’s swing low and two notable peaks from March last year. A decisive breakdown below the falling wedge’s lower trendline could see Nvidia shares revisit lower support around $87, near the bear trap low and a range of price action between March and May last year.
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