Yi-Hwa Chen/Bloomberg/Getty Images
A view of Nvidia’s offices in Taipei, Taiwan, in June 2023.
London
CNN
—
Nvidia briefly lost its title as the world’s most valuable publicly traded company after its stock price plunged nearly 13% last week.
NVIDIA, the American semiconductor manufacturer, surpassed Microsoft in market capitalization when it reached $3.34 trillion on June 18, but has since fallen by $430 billion. Its current market capitalization is $2.91 trillion, dropping it to third place behind Microsoft (MSFT) and Apple (AAPL), whose market capitalizations are $3.33 trillion and $3.19 trillion, respectively.
Nvidia (NVDA) shares fell 6.7% on Monday, their third straight day of declines, signaling that investor enthusiasm for the key role the company is expected to play in the artificial intelligence revolution is cooling after a spectacular run-up in the stock price.
“We believe in AI, but have seen signs of over-excitement in U.S. markets over the past month,” Deutsche Bank research strategist Jim Reed wrote in a note on Monday.
Nvidia’s shares have soared, up about 139% in the past year. The company’s chips power AI systems, including Generative AI, the technology behind OpenAI’s ChatGPT, which can create text, images and other media.
“What we’re seeing with Nvidia is typical volatility, which is to be expected when a stock price rises as sharply as Nvidia’s,” Jochen Stanzl, chief market analyst at trading platform CMC Markets, told CNN. “A lot of good news is priced in. Now investors are starting to take profits, preferring to sell what has been one of the best-performing shares so far this year.”
Enthusiasm over the potential for AI to fundamentally change the way we live and work, and generate big benefits for investors, has driven much of the stock market’s gains over the past year and a half.
Nvidia is part of the so-called Magnificent Seven, a group of giant technology companies whose share prices have risen much more than the overall U.S. stock market last year. While the S&P 500 index is up 24.2% so far this year, the Magnificent Seven’s stocks have risen an average of 111%.
Deutsche Bank said in a note on Monday that the dominance of seven stocks “has pushed the U.S. equity market close to its most concentrated state on record.” The bank wrote on Tuesday that a day earlier’s decline in Nvidia shares “dragged U.S. equity returns broadly.”
The S&P 500 closed down 0.3% on Monday, while the tech-heavy Nasdaq lost 1.2%.
But Darren Nathan, head of equity research at investment platform Hargreaves Lansdown, is not overly worried about the spread of the virus.
“While Nvidia sneezed, the broader market did not catch a cold, and the rest of the Magnificent Seven saw a mix of less extreme moves in both directions,” he wrote in a note on Tuesday. “Meanwhile, among other sectors, U.S. stocks rose (Monday) with energy, financials and utilities signaling investor confidence in the overall health of the economy.”
