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Nvidia's warning is just the tip of the iceberg for sinking chips, says technician

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Nvidia's warning spooks semis stocks

A cloud is hovering over the chip space that some say is about to burst.

Nvidia shares cratered 14 percent Monday after the chipmaker cut its guidance, citing weakness in China. The plunge dragged down the entire chip space with the SMH semiconductor ETF falling 2 percent on the day.

Oppenheimer technical analyst Ari Wald sees no reprieve just yet.

"You have some [chip stocks] that are starting to turn up while some are still basing and have more work to do," he said Monday on CNBC's "Trading Nation." "We would put Nvidia in the latter. It still needs to base and there's more work that's needed."

Wald is looking for Nvidia to retest its low of around $125 that it hit near the start of the year. That, to Wald, is when Nvidia will base and start to move up. It closed on Monday at $138.01 and was 1 percent lower in Tuesday's premarket.

"What we want to see is the stock start to move sideways while its 200-day moving average, which is still north of the $200 catches down to price," Oppenheimer said. The stock's 200-day moving average currently sits at $222, much higher than the $125 level he's eyeing.

"So I think it's still early here, too late to bet against it, too late to bet on it," he said.

Chantico Global CEO Gina Sanchez also sees fundamental headwinds that could prevent an Nvidia rally in the shorter term. Not only does Sanchez believe the drop in cryptocurrencies hurt the chipmaker's revenues, but the slowdown in cloud computing could also hit the stock.

"I think the general slowdown in China and the slowdown in cloud computing is actually going to be a bit of a cloud over the industry," she said on "Trading Nation."

However, Sanchez said the company's efforts in the autonomous driving industry could be a boon for Nvidia.

Despite Monday's plunge, shares of Nvidia are still up more than 3 percent this year.