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Nvidia has dropped roughly 15% from its $236 all-time high, sitting just 5% away from official bear market territory at $189.

The SpaceX IPO is pulling capital from winning stocks, yet Nvidia trades at 23x forward earnings versus AMD's 64x and Broadcom's 32x.

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The market has entered an unusual phase where investors are no longer rewarding every company tied to artificial intelligence. Instead, capital is becoming more selective. High-profile opportunities are competing directly for investor dollars, valuations are facing greater scrutiny, and even market leaders are being forced to prove they deserve premium status.

That shift is now showing up in Nvidia's (NASDAQ:NVDA) stock price. After spending much of the past year as the face of the AI boom, Nvidia has slipped below $200 per share, fully in correction territory. The question for investors is no longer whether the stock can fall. It's how much further it can go.

Nvidia recently broke below $200 per share, placing it back near the same level where the stock traded last October. Investors may remember that period well. After briefly trading above $200, Nvidia spent more than six months moving sideways before eventually breaking out and climbing above $236 per share to set a new all-time high.

The math has become difficult to ignore:

Metric

Value

Recent High

$236+

Current Price

Below $200

Decline From High

Approximately 15%

Bear Market Threshold

-20%

Price at -20%

About $189

A drop to roughly $189 would officially place Nvidia in bear market territory based on the traditional definition of a 20% decline from its high. That sounds dramatic, but it would require only another 5% decline from current levels.

The obvious explanation would be deteriorating fundamentals, but Nvidia's business remains strong. According to the company's latest earnings release, revenue growth continues to outpace most large-cap technology peers while AI infrastructure spending remains elevated. Instead, investors appear to be reevaluating expectations.

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One factor may be the massive SpaceX IPO scheduled for tomorrow. Reports indicate demand for the offering has reached record levels, with both institutional and retail investors vying for a piece of the pie. Both groups alike may be raising cash to participate. When that happens, even winning stocks can face selling pressure.

There is also a valuation debate underway. Surprisingly, Nvidia doesn't look expensive compared to many AI peers.

Company

Forward P/E

Nvidia

~23x

Microsoft (NASDAQ:MSFT)

~20x

Broadcom (NASDAQ:AVGO)

~32x

Advanced Micro Devices (NASDAQ:AMD)

~64x

At 22 times forward earnings, Nvidia trades closer to the broader market than investors might expect from a company projected to deliver double-digit revenue and earnings growth over the next several years.

That said, investors are questioning whether the explosive growth rates seen during the first phase of the AI boom can continue indefinitely. When expectations decline, valuation multiples often contract even if earnings continue growing.

24/7 Wall St.

From unchecked boom to critical scrutiny—Nvidia’s slide below $200 marks a high-stakes turning point for the entire AI market. © 24/7 Wall St.

Technically, Nvidia's next major support zone sits near last year's trading range between $180 and $190. That would align closely with the 20% bear market threshold.

A more severe decline would likely require one of three developments:

AI infrastructure spending slows materially.

Corporate customers delay GPU purchases.

Earnings growth falls below current expectations.

At the moment, none of those scenarios have emerged in Nvidia's reported results.

Granted, stocks rarely stop falling simply because they look cheap. Market sentiment can drive prices below fair value for weeks or months. Yet history suggests that quality companies with growing earnings and reasonable valuations eventually attract buyers.

In short, Nvidia could absolutely fall another 5% and enter official bear market territory. A move toward $189 would not be surprising given current market volatility and the competition for investor capital created by the SpaceX IPO.

However, the more important fact for long-term investors is that Nvidia now trades at roughly 23 times forward earnings despite remaining the dominant supplier of AI accelerators. That is a very different setup than the one investors faced when the stock traded at far richer valuations.

Regardless of whether Nvidia briefly dips below the 20% threshold, the company's earnings growth, market leadership, and valuation suggest the stock is beginning to look more attractive than dangerous. For patient investors, the current pullback may ultimately resemble last October's consolidation period more than the start of a prolonged decline.

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