After two down sessions, Nvidia is down 6.65% since its last ATH (based on daily closing prices). This is the biggest drop since April when we had a drawdown of 19.79%, ending with a strong note: a 10% price drop in one day... on April 19.
Since the bottom in October 2022, we have so far had three large drawdowns of around 20%, and with such large drawdowns, the entire market (S&P500) joined the declines at the same time - see Figure 1. Generally, it can be said that during this period, Nvidia did not have any major declines above 10% unless the entire market fell at the same time.
The current Nvidia drawdown of 6.65% did not result in declines on the S&P500 - where the drawdown is only 0.41%.
Let's check what drawdowns we faced in the case of Cisco Systems in the 1990s. See Figure 2.
From the bottom of 1994 ($0.77), the price of Cisco rose to the top in 2000 ($56.85) by 73 times! At the same time, the S&P500 increased only 3.4 times. On the way to the top, Cisco had 5 drawdowns above 20% (the largest were 51%, 38%, 37%, 29%, 26%). However, the size of the drawdown was less related to the decline of the entire market (S&P500). Only the last large drawdown in 1998 can be clearly linked to the decline of the broad market (Cisco -37%, S&P500 -19%). Interestingly, the declines also ended with a strong one-day decline (on August 31, 1998, the S&P500 fell 6.8%, marking the bottom of the correction). Cisco fell 13.5% on that day (although it marked the bottom of its own correction only on October 7, 1998). But similarly in the case of Cisco... the end of the correction was associated with a strong accent: 3 consecutive days of declines of -13%, -4% and -5%. In total 21%. From then until 2000 top, Cisco's share price increased by 630%!
Figure 3 compares Nvidia and S&P500 drawdowns, and Figure 4 similarly for Cisco Systems. In the case of Nvidia, historical declines above 50% are nothing out of the ordinary. However, after a decline of 89% in 2002, Cisco needed as many as 19 years to set another ATH.
In the case of Nvidia, the size of the drawdown may be influenced (in the future) by the scale of the slowdown in Nvidia's revenue growth, as well as how such a slowdown in growth, or even a possible decline in revenues, will be received by the market.