Nvidia shares took a substantial tumble on Monday, enduring a remarkable depletion of value due to continued selling. This AI-focused semiconductor manufacturer saw its shares slide by 6.7%, marking its third consecutive negative session and the largest single-day percentage reduction since April. The triple day dip wiped approximately $430 billion off Nvidia’s market cap, a record three-day loss for any company, as per Bloomberg data.
The share price fell by 13% within this period, exceeding the 10% correction threshold. This decline significantly impacted other chip manufacturers, with the Philadelphia Stock Exchange Semiconductor Index shrinking by 3% on Monday. Broadcom saw a 4% loss, Qualcomm Inc. went down by 5.5%, and ARM Holdings experienced a 5.8% depletion. Taiwan Semiconductor Manufacturing Co’s US-listed shares also saw a 3.5% dip.
The slump pushed Nvidia’s value back beneath the $3 trillion mark, placing its size below both Microsoft and Apple. Nvidia had only recently claimed the title of the world’s largest stock.
Empiric LT Equity team’s portfolio manager and head, Neville Javeri at Allspring Global Investments, suggested that the possibility of investors developing AI-fatigue or anxiety about index concentration could impact the near future.
Despite the recent downturn, Nvidia’s year-to-date growth stands at almost 140%, marking it as the second highest performer among the S&P 500 Index constituents, just behind AI enthusiast Super Micro Computer.
Even though there was a decline of about 20% earlier in the year, the stock quickly bounced back to record highs. The dramatic rise of Nvidia’s shares – an impressive 240% increase over 2023 – has raised valuation concerns, despite its high-demand AI processing chips attracting many investors. Currently, the company’s shares trade at 21 times predicted sales over the upcoming year, making them the S&P 500’s priciest. Bloomberg data shows that approximately 90% of analysts recommend purchasing, with the average analyst price target suggesting an upside of around 12% from current levels.
Charlie Ashley, a portfolio manager at Catalyst Funds, commented on the staggering momentum of Nvidia and AI stocks in general, whilst advising against contrarian investing at this time.