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Here's how Nvidia stock tends to perform after losing over 9% in a single day

US-based tech heavyweight NVIDIA Corporation (NASDAQ:NVDA) saw its shares collapse yesterday, ultimately losing more than a sixth of its value. The drop was a direct result of the unexpected rise of a Chinese artificial intelligence (AI) app, DeepSeek.

The AI chatbot, which reportedly costs significantly less to develop than its rivals, launched last week and quickly became the most downloaded free app in the US.

In addition to Nvidia, other chipmakers associated with AI, such as Broadcom Inc (NASDAQ:AVGO) and Advanced Micro Devices Inc (NASDAQ:AMD), also experienced significant losses.

The tech sector selloff comes in response to DeepSeek's rapid success, which has raised questions about the future of US dominance in the AI sector and the scale of investments being planned by American companies.

Last week, OpenAI, along with a group of other firms, committed to invest $500bn (£400bn) in building AI infrastructure in the United States.

DeepSeek operates using the open-source DeepSeek-V3 model. The company's researchers state that the model was trained with an approximate budget of $6m, a stark contrast to the billions reportedly spent by its competitors.

How Nvidia stock tends to perform after losing over 9% in a single day

Analyzing Nvidia stock performance after a single-day decline of 9% or more, historical data since 2022 suggests mixed but often positive medium-term recoveries, according to the data compiled by Bloomberg and analyzed by Investing.com.

Out of the seven instances where NVDA fell at least 9% in one session, the stock's relative performance to the S&P 500 (SPY (NYSE:SPY)) over the following weeks shows a tendency toward stabilization and recovery:

  • Short-Term (T+5 days):

    • The reaction is generally positive, with two declines (July and August 2022) and four gains.
    • The worst five-day underperformance was after the August 2022 drop (-13.2%), while the strongest was after the April 2024 drop (+12.2%).

  • Medium-Term (T+10 and T+15 days):

    • By 10 trading days, three out of six instances saw positive relative returns. The worst ten-day underperformance was after the August 2022 drop (-12%), while the strongest was after the April 2024 drop (+12.9%).
    • By 15 days, Nvidia outperformed SPY in five out of six cases, often by a significant margin (e.g., 12.2% in April 2024, 8.2% in September 2024). On the other hand, the worst fifteen-day underperformance was after the August 2022 drop (-14.2%).

While past trends suggest potential medium-term recovery, short-term volatility remains a key risk.

This content was originally published on Investing.com