There has been an ongoing rotation in the stock market, and one of the losers has been previously high-flying Nvidia (NASDAQ: NVDA). Shares of the leading artificial intelligence (AI) chip and software maker continued to drop on Tuesday.
Today, shares fell more than 8% before paring some of that drop. At the intraday low of about $102.5 per share, the stock was down more than 25% from its recent June intraday high of more than $140. As of 2:15 p.m. ET, shares were still lower on the day by 5.6%.
But a sector rotation might not be the only factor driving the drop. It's true that investors are moving out of the large tech companies and into previously lagging small-cap stocks as they prepare for the first interest rate cuts since 2020.
Nvidia CEO Jensen Huang has also been selling the stock, and sometimes that spooks investors. Especially since the stock has more than doubled year to date, even after the recent decline. Huang has sold more than 3 million shares since mid-June at an average price of about $126 per share, reports Barron's.
But insider sales can be made for more reasons than just stock valuation. In fact, Huang's sales have been made through a prearranged trading plan known as Rule 10b5-1. That allows company insiders to sell a planned amount of stock at a scheduled time or set intervals.
Investors might be seeing Huang's sales as a sign it could also be time to de-risk their positions as well. Nvidia won't announce its fiscal second-quarter results until Aug. 28, but investors are already watching earnings reports in the sector this week.
Nvidia shares will likely react to what other prominent tech companies in the artificial intelligence sector like Microsoft and Advanced Micro Devices say about AI investments and demand for chips when each company reports after today's closing bell. Some investors would rather avoid the volatility, and they look to be selling Nvidia stock again today.
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Howard Smith has positions in Microsoft and Nvidia. The Motley Fool has positions in and recommends Advanced Micro Devices, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
Why Nvidia Stock Continued to Slide Today was originally published by The Motley Fool