Nvidia looked set to pare back some of its recent losses on Monday, but analysts at Citi are warning that the artificial intelligence-fueled winning streak that powered the chip maker to a trillion-dollar valuation is coming to an end.
The stock climbed 1% to $104 in premarket trading. On Friday, it had dropped 4.1% to cap off a nightmarish week.
Nvidia shares have tumbled 20% over the past two weeks, dragged down by worries that the AI investing craze that has powered the market higher ever since ChatGPT launched in November 2022 could soon be about to fizzle out.
The expectation that the Federal Reserve will soon start slashing interest rates has also accelerated a rotation out of the once-dominant Magnificent 7 group of megacap tech stocks. Citi analysts said in a research note on Friday that they don't expect Nvidia to carry on being a massive driver of returns for the benchmark S&P 500 index, even though they're predicting that its profit growth will remain strong.
"Our sense is that Nvidia is becoming just another large-cap growth stock," a team led by U.S. equity strategist Scott Chronert wrote. "A simple look at the deceleration in rate of forward guidance increases suggests that its most profound performance and fundamental impacts on index price action may be behind it."
They added that the selloff after Nvidia's solid, but not spectacular, earnings is a sign that the semiconductor giant's status as an AI darling is fading.
Among other chip makers, Advanced Micro Devices rose 1% ahead of the opening bell. Broadcom climbed 0.9%, and Qualcomm was up 1.2%. Futures for the S&P 500 ticked up 0.6%.