Nvidia shares nosedive, erasing $430 billion in value

Nvidia has recently lost its status as the world’s most valuable publicly traded company after a significant decline in its stock price, dropping nearly 13% over the past week.

On June 18, Nvidia’s market capitalization soared to $3.34 trillion, briefly surpassing Microsoft. However, Nvidia’s market cap has since dropped by $430 billion, falling to $2.91 trillion. This decline places Nvidia behind Microsoft and Apple, which have market caps of $3.33 trillion and $3.19 trillion, respectively.

On Monday, Nvidia shares dropped 6.7%, marking the third consecutive day of declines. This suggests that the investor enthusiasm surrounding Nvidia’s pivotal role in the artificial intelligence (AI) sector might be waning after a period of substantial gains.

 

Analyst Insights

Jim Reid, a research strategist at Deutsche Bank, noted signs of overexuberance in the US market concerning AI. In a Monday note, he expressed belief in AI but cautioned about the recent excessive enthusiasm.

Despite the recent decline, Nvidia’s stock rebounded by over 5% on Tuesday, reversing the trend of the past few days. Over the past year, Nvidia’s stock has surged by nearly 139%, driven by the demand for its chips, which power AI systems, including generative AI technologies like OpenAI’s ChatGPT.

Jochen Stanzl, chief market analyst at CMC Markets, commented on Nvidia’s typical volatility following rapid stock price increases. He mentioned that investors seem to be taking profits from Nvidia’s impressive year-to-date performance.

Broader Market Impact

The excitement around AI’s transformative potential has significantly contributed to the stock market’s gains over the past 18 months. Nvidia is part of the “Magnificent Seven,” a group of mega-cap tech companies whose stocks have greatly outperformed the broader US market. Last year, the S&P 500 index rose by 24.2%, while the Magnificent Seven stocks saw an average increase of 111%.

Deutsche Bank highlighted that the US stock market is nearing historical concentration levels due to the dominance of these seven stocks. The bank noted that Nvidia’s decline on Monday had a broader impact on US equity returns.

On Monday, the S&P 500 dropped by 0.3%, and the tech-heavy Nasdaq fell by 1.2%. Despite Nvidia’s drop, Derren Nathan, head of equity research at Hargreaves Lansdown, remained optimistic. He pointed out that the broader market showed resilience, with gains in sectors like energy, financials, and utilities, reflecting investor confidence in the overall economy.

In summary, while Nvidia’s recent stock performance has seen a decline, the broader market remains relatively stable, with investor confidence still intact across various sectors.