NVDA Stock Drops 10% From All-Time High Amid Fresh Risks From New Huawei AI Chip Tech

• Huawei discussed a new approach to developing advanced semiconductors that would enable it to produce vastly superior chips more quickly.
• Nvidia shares have fallen on each trading day since the company’s quarterly report on May 20, which was remarkably strong.
• Stocktwits sentiment for NVDA dropped to ‘bullish’ from ‘extremely bullish.’

Nvidia Corp. shares have been a curious underperformer among major chip stocks lately. Last week's blowout earnings report did little to lift the stock, nor did an $80 billion buyback authorization or a dividend raise. In fact, CEO Jensen Huang went so far as to say that the stock move remains a “mystery” for him.

Now, another risk appears to be weighing on the stock. On Monday, China’s Huawei discussed a new approach to developing advanced semiconductors that would enable it to produce vastly superior chips more quickly.

Huawei’s Chip Threat To NVDA

Huawei’s LogicFolding approach improves chip performance by stacking computing blocks vertically, so data travels shorter distances within the processor, rather than relying mainly on shrinking transistors. Its approach is unique because Huawei is proposing a far more aggressive redesign of chip architecture and packaging to work around U.S. export restrictions and the limits of its manufacturing technology.

Using LogicFolding, Huawei said it aims to produce semiconductors with performance comparable to 1.4nm chips by 2031. That would still leave Huawei years behind TSMC, which is targeting similar advances by 2028, but it would represent a substantially narrower gap than what exists today.

NVDA Stock Under Pressure

Nvidia shares have dropped 10.1% from their peak of $236.54 on May 14, signaling that the stock has entered correction territory. Despite a sharp run-up last month, NVDA shares are up 14% this year, well below peers in the chip sector. Intel and Micron have risen 225% to 230%, while AMD is up 132% – pushing the sector’s benchmark, the iShares Semiconductor ETF (SOXX), 87% higher.

Last week, Nvidia reported blowout quarterly results, announced an $80 billion share buyback, and raised its dividend — moves that signaled strong financial health and underscored robust demand for AI chips. A battery of analysts raised their price targets on the NVDA, although the stock has only slid since then.

On Wednesday, Tigress Financial raised its price target on Nvidia to $425 from $360, keeping a ‘Strong Buy’ rating on the shares. The target is double of NVDA’s last closing price. Nvidia continues to be "the core infrastructure engine of the AI factory era" and is the "must-own core holding for the AI investment cycle," the research firm said.

On Stocktwits, the retail sentiment for NVDA dipped to ‘bullish’ on Wednesday night, from ‘extremely bullish’ the previous day. While the recent move remains unexplained and frustrating, traders argued that the stock would move higher eventually.

“Nvidia is heavily investing billions of dollars in other companies, particularly focusing on AI infrastructure, startups, and data center technology to solidify its dominance. Have faith ... I'm buying the Jensen hedge fund,” a trader said.

For updates and corrections, email newsroom[at]stocktwits[dot]com.

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