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## The Slowdown in Nvidia’s Stock and the Implications for AI Stocks

(Reuters) – The scorching rally in Nvidia’s shares this year came to a dramatic halt on Tuesday as investors began to worry about whether the high-flying chip designer’s quarterly results would justify its towering valuation. The stock fell 5.3% to $687.91, marking what could be its biggest percentage drop in more than eight months if losses hold.

Nvidia has been at the heart of the frenzy surrounding artificial intelligence (AI) and, as a result, saw a more than 40% surge in its stock this year, propelling it to replace Alphabet as the third most valuable U.S. company, behind Microsoft and Apple, with a market capitalization of $1.79 trillion on Friday.

However, investors are now showing hesitation, with Frank Lee, head of technology research at HSBC, noting that the market is unsure whether Nvidia can deliver a strong enough guidance to further invigorate stock valuations. This uncertainty is tied to the upcoming quarterly results on February 21, with analysts expecting earnings of $4.56 a share and revenue to rise to $20.378 billion from $6.05 billion a year earlier, according to LSEG estimates.

Though Nvidia’s stock had been on a staggering upward trajectory this year, powering gains in U.S. stock markets, the potential for underwhelming earnings may make the stock vulnerable. As trader Dennis Dick put it, Nvidia will need to “blow it away” with its results in order for the stock to continue climbing.

The options market is indicating that Nvidia’s results could lead to a significant swing, with options pricing a potential 11% move in either direction. Other AI-focused stocks, such as Super Micro Computer and Arm Holdings, also saw significant declines in response to Nvidia’s slowdown, highlighting how interconnected these companies are within the technology and AI sector.

Meanwhile, Advanced Micro Devices, another player in the chip industry, was also down nearly 6%, despite having recorded double-digit gains on a year-to-date basis.

With Nvidia’s shares trading at 32 times its forward earnings estimates compared to the industry median of 25.4, the company’s performance will likely have implications for the broader technology and AI stock landscape.

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