NVIDIA Isn’t ‘so Expensive,’ but Crowded AI Trade Could Unwind Quickly, Fund Manager Warns

NVIDIA Corp. (NASDAQ:NVDA) stock edged higher in Tuesday premarket trading after falling 3.36% Monday.

The previous session’s decline came as leaders at major artificial intelligence companies, including Anthropic and OpenAI, called for a slower pace of advanced AI development over safety concerns. The debate raised fears that slower AI development could eventually weigh on demand for chips and data center hardware.

NVIDIA shares stabilized Tuesday despite a weaker broader market. Nasdaq futures fell 0.61%, while S&P 500 futures declined 0.53%.

NVIDIA’s early gain suggests some investors are buying the dip after Monday’s sharp decline.

The relative strength is notable because broader futures remain under pressure. However, another weak market session could weigh on high-beta technology stocks after the opening bell.

Meanwhile, traders are watching key moving averages as NVIDIA tests an important technical zone.

AI Concentration Raises Risk

Pella Funds CIO Jordan Cvetanovski told CNBC on Tuesday that NVIDIA does not appear particularly expensive when viewed over a one- to three-year horizon.

However, Cvetanovski sees a bigger risk in the heavy concentration of investor money across NVIDIA, semiconductor stocks and the broader AI trade.

He warned that weaker data center demand or a shift in the AI narrative could trigger a rapid unwind across chip and hardware stocks.

The comments add another dimension to Monday’s selloff. While AI safety concerns have raised questions about the pace of model development, investors are also weighing whether massive infrastructure spending can continue at current levels.

Data Center Spending Remains Key Question

Cvetanovski said the key issue is not whether AI requires data centers, but "how many, and how much is enough."

Any slowdown in AI infrastructure spending could have implications for NVIDIA because data center demand has become central to its growth story.

If the AI trade weakens, Cvetanovski expects some investor money could rotate from chips and hardware into software companies.

He pointed to Microsoft Corp. (NASDAQ:MSFT), Intuit Inc. (NASDAQ:INTU) and SAP SE (NYSE:SAP) as companies that Pella believes can coexist with AI rather than depend primarily on infrastructure spending.

NVIDIA carries a Buy consensus rating with an average price forecast of $348.22.

Piper Sandler initiated coverage with an Overweight rating and $300 price forecast on Sept. 10. Rosenblatt maintained a Buy rating and $390 forecast on Sept. 4. Needham maintained its Buy rating and $300 forecast the same day.

Technical Analysis

NVIDIA trades 3.5% below its 20-day simple moving average of $219.45. It is also 0.6% below its 50-day SMA of $212.91.

However, the stock is roughly flat with its 100-day SMA of $211.35. It also remains 7.1% above its 200-day SMA of $197.61. That keeps the longer-term trend constructive.

Momentum has weakened. The MACD is below its signal line, while the histogram remains negative. That suggests buying momentum has cooled.

Critical Levels: Resistance sits near $214, close to the 50-day moving average. The $190 level represents a broader support zone if selling accelerates.

Benzinga Edge Rankings

The Benzinga Edge scorecard highlights NVIDIA’s strong growth and quality profile.

NVIDIA scores 98.11 for Growth and 97.43 for Quality, both bullish readings. Momentum stands at 68.61, while Value is 7.57.

The rankings point to strong underlying growth and business quality. However, weaker momentum and a low Value score show that valuation and near-term price action remain areas to watch.

Top ETF Exposure

NVIDIA has a 9.94% weighting in the Xtrackers Net Zero Pathway Paris Aligned US Equity ETF (NYSE:USNZ). It also accounts for 9.79% of the First Trust Innovation Leaders ETF (NYSE:ILDR) and 9.73% of the Franklin Focused Dynamic Growth ETF (NASDAQ:FFOG).

The large weightings mean flows into or out of these ETFs can contribute to NVIDIA trading activity.

NVDA Price Action

NVDA Stock Price Activity: NVIDIA shares were up 0.18% at $211.33 during premarket trading on Tuesday, according to Benzinga Pro data.

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