What’s Pushing NVDA Stock Down?
NVIDIA Corporation (NASDAQ:NVDA) fell 3.6% by late Thursday morning, continuing a decline that started on Wednesday following an increase in shorting positions on one of the best-performing stocks of 2016.
In what was a major theme for the stock market in 2016, another share price has found itself damaged by a tweet. For a change, it was not President-elect Donald Trump’s busy fingers that brought about a decline in NVDA stock, but rather a noteworthy short seller, Citron Research, known for its 2015 call on Valeant Pharmaceuticals Intl Inc (NYSE:VRX). (Source: “Nvidia stock pulls back as Citron adds to short interest,” MarketWatch, December 29, 2016.)
Citron outlined six reasons why it believed that NVDA stock was on its way down, justifying Citron’s own short position, and sending many other investors to join it. This ended up costing the shares seven percent on Wednesday, prior to Thursday’s decline.
— Citron Research (@CitronResearch) December 28, 2016
There are also concerns as to whether Nvidia stock has reached a level of resistance.
With NVDA stock’s meteoric rise in 2016, up 216%, short sellers have seen an opportunity, with an increase in shorts by 60% between late July and mid-December, for a total of 71.4 million—or about 14%—of Nvidia shares available.
While much of NVDA stock’s success came from the usage of the company’s chips in machine learning and other markets set to expand in 2017, Citron outlines that most of its financial results came from more traditional markets like gaming—markets that are not likely to see significant growth in the coming year. These industries already have established competitors, like Intel Corporation (NASDAQ:INTC), that could cut into these profits.
Citron said that it expects NVDA stock to fall back to $90.00, which would mark an over-10% decline from the current $105.00 trading price.