Nvidia crashes to pre-AI prices while AI demand stays red-hot — contrarian bounc
Thesis
Bloomberg reports that Nvidia has lost roughly $1 trillion in market value, pushing its valuation back to pre-AI boom levels. This massive sell-off is creating a situation where the stock might be heavily discounted. However, the underlying demand for AI hardware is still clearly present, as shown by SK Hynix planning a massive $28 billion US listing to capitalize on the AI wave. We are seeing a divergence where the broader market is panicking, but options traders are actively betting on a significant Nvidia rebound, viewing the sell-off as overdone given the company's record revenues.
Strategy approach
Build a rule-based strategy that enters long NVDA on D1 when the stock's price-to-earnings ratio falls below 25 (or hits a multi-year low) and the stock closes up 2% from the previous day's low, with a 14-day max hold and a 5% stop loss.