Nvidia (NASDAQ:NVDA) has spent the past few months trying to retest its all-time high, but every attempt has failed as the company contends with significant headwinds. The technical picture also suggests that a successful retest will take time.
Nvidia is Contending With Some Major Headwinds
Jensen Huang’s Nvidia is contending with some major headwinds. One of them is that there is a growing call for the AI development to slow down, a move that would affect its business. Huang, together with President Donald Trump, has insisted that the AI industry needs to continue growing to give the US a lead against China.
Concerns about the data center industry are also leading to project delays or cancellations. A good example of this is Project Jupiter, which is being built by Oracle (NASDAQ:ORCL) in a 14,000-acre piece of land in New Mexico. The project is facing delays amid environmental concerns.
The company is also contending with the rising competition in the GPU industry. OpenAI has developed its Jalapeno chip in a collaboration with Broadcom (NASDAQ:AVGO). In a statement, Sam Altman has said that the chip is beating those made by Nvidia in some metrics.
Other top Nvidia clients like Microsoft (NASDAQ:MSFT), Meta Platforms (NASDAQ:MSFT), and Amazon (NASDAQ:AMZN) are also building their own chips. This is notable since these big-tech companies account for about 50% of its revenue.
Smaller companies like SambaNova, Euclyd, and Etched have also received millions of dollars in investments to challenge Nvidia. Samsung Electronics invested in Euclyd, a Dutch company, last week.
Nvidia stock is also struggling as some of the companies it has invested in retreat. This includes neocloud companies like CoreWeave, Nebius, and IREN, which have all slipped into a bear market.
On the positive side, Nvidia’s growth continues despite these challenges. Its latest results showed that second-quarter revenue more than doubled, and management expects revenue to grow by more than 77% in the next financial year.
The company may also benefit from the upcoming Trump-Xi meeting in Washington. A deal for the company to sell its most advanced chips to China would lead to faster revenue growth.
Nvidia is also trading at bargain prices. It trades at a forward price-to-earnings ratio of 23, lower than the five-year average of 58.
Nvidia Stock Has Formed a Break-and-Retest Pattern
The daily chart shows that NVDA stock has formed a risky pattern that may lead to more downside in the near term. It formed a rising wedge pattern, which is made up of two ascending and converging trendlines. This pattern normally leads to a strong bearish breakout.
Notably, the stock has retested the lower side of this pattern, confirming a break-and-retest pattern. A retest usually confirms a bearish breakout. The Relative Strength Index (RSI) has also formed a bearish divergence pattern.
Therefore, there is a risk that the stock will resume the downward trend, potentially to this month’s low of $209.
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