Nvidia Stock Enters Correction Territory As U.S.-China Semiconductor War Heats Up: Wall Street and Retail Stay Bullish

Nvidia Corp. shares fell 2.5% on Monday, entering correction territory as geopolitical tensions between the U.S. and China around semiconductor production escalated. 

The stock is now down 12% from its recent high of $148.88, raising concerns among investors after a stellar year of growth driven by the artificial intelligence boom.

The New York Times reported that the Biden administration is preparing to investigate China's production of older-model semiconductors. 

The probe could lead to tariffs, import bans, or other restrictions, which may impact U.S. chipmakers like Nvidia. 

The investigation could proceed under Section 232 of the Trade Expansion Act, focusing on national security threats, or Section 301 of the Trade Act of 1974, targeting unjustifiable trade practices. 

The ultimate direction of the policy will fall under President-elect Donald Trump’s administration, adding an element of political uncertainty.

Despite Nvidia’s 165% rally so far this year, fueled by AI demand, recent anti-trust investigations and geopolitical challenges have weighed on the stock. 

December’s losses have pushed Nvidia into correction territory, with the definition often cited as a decline of 10% or more from a recent peak.

Truist, however, remains optimistic. The brokerage raised its price target for Nvidia from $169 to $204, maintaining a ‘Buy’ rating. 

It highlighted Nvidia’s technological superiority and dominance in the AI space. Also, it pointed to Nvidia's plans to launch a client-side CPU in 2025, which could add a $35 billion addressable market.

 

Nvidia Sentiment and Message Volume on Dec 16 as of 1:50 p.m. ET | Source: Stocktwits

Retail sentiment around the stock improved to ‘bullish’ from ‘bearish’ after the price target hike, with chatter increased to ‘high’ from ‘low’ a day ago. 

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