Nvidia’s Correction: A Valuation Reset, Not a Crack in the AI Story
Published on 07/31/2026 at 04:51 | Redaktion boerse-global.de
The recent turbulence in semiconductor markets has raised a pointed question for investors: is the pullback in Nvidia’s stock a warning sign of fading AI demand, or simply a recalibration of expectations after an extraordinary run? The evidence from the past week suggests the latter — though the path to that conclusion runs through some complex financial engineering and a sector-wide shakeout.
A Sector-Wide Selloff With a Silver Lining
The scale of the recent drawdown was striking. Roughly 20 of the world’s most valuable chipmakers collectively shed $1.3 trillion in market value since the previous Friday, according to a CNBC analysis of FactSet data. Nvidia absorbed the largest share of that selloff, losing $238 billion — though it fared considerably better than its peers. Marvell Technology emerged as the group’s biggest casualty, dropping 22.56 percent on the week and 41.16 percent on a monthly basis. AMD and Marvell each gave up around 22 percent, while Nvidia’s decline was comparatively modest at roughly 10 percent.
The trigger for the broader selloff came from an unlikely corner: SK Hynix. Despite posting record profit and revenue, the South Korean memory-chip giant missed analyst expectations, sending its shares down as much as 15 percent intraday before closing 9.61 percent lower. SK Hynix, Samsung Electronics, and Micron collectively lost $176 billion, $173 billion, and $113 billion respectively. Adding to the pressure were reports of Chinese progress in advanced chip manufacturing, which fueled concerns that the AI investment boom may have peaked. The tech-heavy Nasdaq 100 drifted toward correction territory.
The OpenAI Financing Question
For Nvidia specifically, a different narrative has been driving the stock’s weakness. Reports emerged that the company is in talks to secure $250 billion in financing for OpenAI, funds intended to back computing power for a US data center project. The potential guarantee — one of the largest of its kind for the chipmaker — revived long-standing concerns about "circular" financing, where suppliers simultaneously become major investors in their own customers. Days earlier, Nvidia had announced a strategic partnership with the SK Group valued at over $500 billion.
Should investors sell immediately? Or is it worth buying Nvidia?
The market response was immediate. On July 27, the stock fell more than 5 percent, its steepest one-day decline since February 2026, breaking through several moving averages before finding a low near $195.
The criticism underpinning the selloff isn't without merit: if AI demand falls short of expectations, the risk of losses could amplify across the entire supply chain. But analysts are careful to distinguish between sentiment and fundamentals. Charlie Dai of Forrester views the selloff less as evidence of weakening AI demand and more as a reassessment of expectations following an exceptionally strong rally. The debate, he suggests, is about valuation and financing structure — not whether chip demand itself is eroding.
Fundamentals vs. Market Mood
The disconnect between the stock’s performance and its underlying business is stark. For fiscal 2026, Nvidia’s revenue and net income both climbed 65 percent year over year, with revenue reaching $215.9 billion, up from $130.5 billion the prior year. Net income hit $120.1 billion. The company’s gross margin remained robust, and free cash flow continues to fund both reinvestment and shareholder returns.
The valuation metrics tell a similar story. At a forward price-to-earnings ratio of 22, Nvidia’s revenue is growing 85 percent year over year, with a net margin of 55.6 percent. Quarterly free cash flow stands at $48.55 billion — figures that make the multiple look far from demanding. The market appears to be granting Nvidia a premium status within the AI value chain, and the numbers support that distinction.
There’s also been a modest geopolitical positive. A senior US trade official stated that only "very few" H200 AI chips have been delivered to China and Hong Kong so far — a "very small amount." While volumes remain insignificant, licenses are being granted and shipments are resuming. That removes a tail risk without yet becoming a genuine growth driver.
Wall Street’s Bullish Consensus
Despite the volatility, the analyst community remains largely constructive. Of the 61 analysts covering Nvidia, 58 rate the stock a buy or strong buy, with just two recommending hold and one suggesting sell. The most aggressive target comes from Tristan Gerra of Baird, who sets a price objective of $500 — viewing Nvidia not merely as a chipmaker but as an integrated AI platform. The consensus across all 61 analysts stands at $302.83, implying roughly 59 percent upside from current levels.
That optimism extends to the demand side. While Alphabet shares came under pressure after the company raised its investment targets for AI infrastructure, the spending plans of the major tech conglomerates remain a key watchpoint. Microsoft, Amazon, and Meta have yet to report quarterly earnings, with further increases in AI spending widely anticipated. For Nvidia’s order book, rising hyperscaler budgets are fundamentally positive — even if the market has lately preferred to read them as evidence of unsustainable expenditure.
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Technical Picture: Bruised but Not Broken
Chart-wise, the stock remains in a corrective phase. It trades 16.40 percent below its 52-week high of $202.50 set in May, and roughly 5.53 percent under its 50-day moving average of $179.21. The relative strength index of 41.6 suggests the stock isn’t yet oversold, leaving room for further fluctuation. Notably, the distance to the 200-day moving average is just 1.24 percent — the long-term trend remains intact.
Year to date, the stock is still up 5.63 percent, with a 12-month gain of 8.53 percent. The correction has been painful, but the longer-term uptrend has not been broken.
A Correction of Sentiment, Not Substance
What emerges from the recent turbulence is a picture of a market wrestling with the mechanics of how Nvidia’s growth is financed, rather than questioning whether that growth is real. The concerns about circular financing involving OpenAI and the SK Group merit close attention, but they speak to the architecture of the company’s expansion — not the validity of the underlying demand.
With the stock trading well below its 52-week high and analyst targets, the current weakness looks more like a valuation and sentiment correction than the beginning of a structural downturn. It’s a pullback that reflects nervousness about financing structures — not a fracture in the AI growth story itself.
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Nvidia Stock: New Analysis - 31 July
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