Machine Learning Answers: If Nvidia Stock Drops 10% A Week, What’s The Chance It’ll Recoup Its Losses In A Month?

by Trefis Team
+2.01%
Upside
501
Market
511
Trefis
NVDA
nVIDIA
Rate   |   votes   |   Share

We found that if Nvidia (NASDAQ:NVDA) Stock drops 10% or more in a week (5 trading days), there is a solid 36% chance it’ll recover 10% or more, over the next month (about 20 trading days)

Nvidia stock has seen significant volatility this year. While the company has been impacted by the broader correction in the semiconductor space and the trade war between the U.S. and China, the stock is being supported by a strong long-term outlook for GPU demand amid growing applications in Deep Learning and Artificial Intelligence.

Considering the recent price swings, we started with a simple question that investors could be asking about Nvidia stock: given a certain drop or rise, say a 10% drop in a week, what should we expect for the next week? Is it very likely that the stock will recover the next week? What about the next month or a quarter? You can test a variety of scenarios on the Trefis Machine Learning Engine to calculate if Nvidia stock dropped, what’s the chance it’ll rise.

For example, after a 5% drop over a week (5 trading days), the Trefis machine learning engine says chances of an additional 5% drop over the next month, are about 40%. Quite significant, and helpful to know for someone trying to recover from a loss. Knowing what to expect for almost any scenario is powerful. It can help you avoid rash moves. Given the recent volatility in the market, the mix of macroeconomic events (including the trade war with China and interest rate easing by the U.S. Fed), we think investors can prepare better.

Below, we also discuss a few scenarios and answer common investor questions:

 

Question 1: Does a rise in Nvidia stock become more likely after a drop?

Answer: 

Not really. 

Specifically, chances of a 5% rise in Nvidia stock over the next month:

= 40%% after Nvidia stock drops by 5% in a week.

versus,

= 44.5% after Nvidia stock rises by 5% in a week.

 

Question 2: What about the other way around, does a drop in Nvidia stock become more likely after a rise?

Answer:

No.

Specifically, chances of a 5% decline in Nvidia stock over the next month:

= 40% after NVIDIA stock drops by 5% in a week

versus,

= 27% after NVIDIA stock rises by 5% in a week

 

Question 3: Does patience pay?

Answer: 

According to data and Trefis machine learning engine’s calculations, largely yes!

Given a drop of 5% in Nvidia stock over a week (5 trading days), while there is only about 28% chance the Nvidia stock will gain 5% over the subsequent week, there is more than 58% chance this will happen in 6 months.

The table below shows the trend:

 

Question 4: What about the possibility of a drop after a rise if you wait for a while?

Answer:

After seeing a rise of 5% over 5 days, the chances of a 5% drop in Nvidia stock are about 30% over the subsequent quarter of waiting (60 trading days). However, this chance drops slightly to about 29% when the waiting period is a year (250 trading days).

What’s behind Trefis? See How It’s Powering New Collaboration and What-Ifs

For CFOs and Finance Teams | Product, R&D, and Marketing Teams

More Trefis Research

Like our charts? Explore example interactive dashboards and create your own.

Rate   |   votes   |   Share

Comments

Name (Required)
Email (Required, but never displayed)
Be the first to comment!