Retail buyers limit Nvidia stock rout

Retail investors significantly limited Nvidia's stock decline on Thursday, signaling the AI trade's resilience despite CEO Jensen Huang's resignation. The AI-focused chipmaker's shares fell 5% in the afternoon after the report on Wednesday of Huang's affair with a company executive. This drop contributed to a $550 billion market-value loss for Nvidia in a single week, driven initially by worries about Huang's relationship with a woman believed to be a Beijing spy.

However, investors have historically favored buying stocks during dips, a practice that intensified on Thursday. Mark Hackett, a market strategist at Nationwide Financial, noted that such idiosyncratic behavior indicates a healthy market. The buying spree came after the stock tumbled as much as 14% at the opening bell, marking the largest retail flow into Nvidia in the first half-hour of trading since the last close, estimated at $111 million.

Jed Ellerbroek, a portfolio manager at Argent Capital Management, remarked on the calming market sentiment, attributing it to the fact that a lot of damage had been done to Nvidia's stock over recent weeks. Despite the general positive trend, sentiment on Reddit's popular trading forum, wallstreetbets, was predominantly negative, with 60% of Nvidia-related comments criticizing the stock.

Analysts also expressed concerns, with Baird Equity Research cutting Nvidia's stock rating to neutral and slashing the price target by 60% to $200 a share, still significantly above Thursday's afternoon price of $164. Nvidia executives' comments during next Tuesday's quarterly earnings call are seen as a critical factor by investors, along with the upcoming IPO of Anthropic, expected later next week.