The US Thanksgiving holiday is upon us. This means more for Americans than for those of us in the UK or Europe, but the break has significance for all investors.
For a start, Thanksgiving always takes place on a Thursday when US banks and exchanges close completely.
But the holiday season begins the day before, as many people leave work early to make sure they’re with friends and family in good time for the day itself.
Think ‘Planes, Trains and Automobiles’. Having made this effort, plenty of workers take Friday off as well, if they can, to make the most of ‘Black Friday’ and turn the holiday into a long weekend.
This is not to say that there’s no trading at all, as there are futures markets on all the major US stock indices, while FX carries on as normal.
But it does mean that there’s a sharp decline in market activity as trading volumes fall, while US equities and other cash markets are either closed or subject to shorter trading hours.
This results in a lack of liquidity for a three day period while the world goes on revolving, and things still happen.
The bottom line is that this holiday period can lead to periods of heightened volatility and big price moves.
So it’s a good time to undertake a bit of risk management and check one’s stop losses.
This would seem to be more important than ever, given recent events. November hasn’t been kind to Nvidia’s shareholders.
The giant chip designer at the forefront of the development of Artificial General Intelligence (AGI) has had a torrid time of late.
Having posted an all-time closing high of $210 per share at the end of October, Nvidia then suffered a barrage of selling, which saw it pull back to support at $180 just ahead of its third-quarter earnings update.
The pullback came as regulatory notices revealed that Michael Burry, who predicted the US housing implosion, which triggered the Great Financial Crisis had taken out short positions on Nvidia and another tech darling, Palantir.
In addition, Japan’s tech investment giant, SoftBank, had fully divested its Nvidia holdings, although in fairness, and in a typically gung-ho move typical of CEO Masayoshi Son, it ploughed the proceeds into ChatGPT owner, OpenAI.
But news that tech investor par excellence, Peter Thiel, had also dumped his Nvidia stock really got people worried.
Then came the company’s earnings update.
Nvidia blew past all expectations on sales and earnings per share, and offered strong forward guidance.
CEO Jensen Huang went on to say that demand for its market-leading Blackwell chips was ‘Off the scale’.
The stock price soared, jumping 6% in little over an hour. But then it turned sharply, completely reversing earlier gains and taking most of the tech sector down with it.
Less than a week later, the stock broke below $170, hitting its worst levels in over two months for a high-low loss of 19% – almost bear market territory.
Nvidia has just experienced its worst run since late January. This was when Chinese startup DeepSeek launched a free AI assistant produced at a fraction of the cost of its US competition.
Suddenly, Nvidia’s commercial moat had dried up, and the competition was eating its lunch.
When investors woke up to the implications of this, they sent Nvidia’s share price down 36% over the next six weeks.
Could we be seeing something similar now unfolding? While there’s no way of knowing how far China’s tech sector has progressed since then, its developers will have been busy.
Also, we do know what’s happening in the US, and it would appear that there are alternatives to Nvidia’s world-beating Blackwell chips.
It turns out that Meta Platforms, an Nvidia customer, is talking to Alphabet’s Google about using its proprietary tensor processing units in Meta’s data centres.
When one looks at the details, this sounds like quite a specific deal.
But it does suggest that Nvidia may have some competition after all.
It may have refilled its moat, but Google has let down the drawbridge. Others will follow.
(David Morrison is a Senior Market Analyst at Trade Nation. Views are his own.)
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