Nvidia’s Market Value Plunges by US$400 Billion Amid Steep Stock Decline

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Nvidia
Nvidia

Nvidia, a leading AI-focused chip maker, experienced a significant downturn on Monday, entering correction territory amidst a pronounced sell-off that rattled investors.

The company’s shares dropped 4.8% during Monday’s trading session, marking the third consecutive day of losses. This decline extended a cumulative 12% drop over the past three days, surpassing the 10% threshold commonly recognized as a correction.

The broader impact of Nvidia’s slump was felt across the semiconductor sector, with the Philadelphia Stock Exchange Semiconductor Index declining by as much as 2.2% on Monday. Key players in the industry, such as Broadcom, TSMC, and Qualcomm, also saw their shares fall by at least 2%.

The recent three-day slide has led to Nvidia shedding more than $400 billion in market capitalization, pushing it below the $3 trillion mark and positioning it below Microsoft and Apple’s market size. Last week, Nvidia briefly held the world’s most significant stock title.

Neville Javeri, portfolio manager and head of the Empiric LT Equity team at Wellspring Global Investments, commented on the situation, stating, “In the near term, it is plausible that investors begin suffering from AI fatigue or become more broadly concerned about index concentration.”

Despite the recent downturn, Nvidia remains a standout performer in 2024, surging more than 140% year-to-date. It is the second-best performer among the S&P 500 Index components, trailing only Super Micro Computer, another prominent player in the AI sector.

Earlier this year, Nvidia faced a similar drawdown of approximately 20%, which it swiftly recovered from, reaching new all-time highs.

While Nvidia continues to attract investors due to high demand for its AI-processing chips, concerns about its valuation persist. The stock trades at nearly 23 times estimated sales over the next 12 months, marking it as the most expensive stock in the S&P 500.

Nonetheless, Wall Street sentiment towards Nvidia remains broadly positive, with nearly 90% of analysts tracked by Bloomberg recommending a buy. The average analyst price target suggests a potential upside of approximately 10%.

Commenting on the broader trend, Charlie Ashley, portfolio manager at Catalyst Funds, remarked, “The momentum in Nvidia and AI stocks in general has been staggering. In terms of investing, I would not be a contrarian right now.”

The future trajectory of Nvidia’s stock performance will likely be closely watched as investors navigate through volatile market conditions and assess the sustainability of its remarkable growth trajectory amid broader economic uncertainties.

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