Nvidia’s market value has dropped by more than $500bn since it briefly became the most valuable company in the world last week. Shares fell nearly 7 per cent Monday.
Nvidia’s value has dropped from $2.91tn to $2.91tn. This is a drop of approximately $550bn since Thursday’s high. Last week, Nvidia had surpassed Apple and Microsoft to become the world’s most valuable publicly-listed company. However, it has now fallen to third place.
Nvidia is down 16 percent from the intraday high price of 140.76 dollars, which it reached last Thursday.
Analysts have warned that Nvidia could trigger a market crash if it sells off enough chips. The index has risen almost 140% in 2024.
Barry Bannister is the chief equity strategist for Stifel. He said that if Nvidia makes a lot of corrections in the next few months, it will be very hard to continue the rise of the S&P 500. He added: “And Nvidia’s earnings will slow down.” Bannister was referring to Nvidia’s strong growth in the past.
The decline on Monday follows Friday’s disclosure that Jensen Huang – the chief executive and founder of the chipmaker – sold shares worth almost $95mn in the days before and after the company became the most valuable company. Filings reveal that the trades were a part of an earlier scheduled Rule 10b5-1 sales plan, which was set up in March.
Nvidia refused to comment on sales.
Some sceptical analysts have drawn comparisons between the stock’s rapid rise and Cisco, the networking company that briefly became the most valuable in the world at the height of the dotcom bubble in March 2000.
Cisco’s value dropped by 80 percent the following year, as the telecoms bubble burst, and groups cut back on spending for broadband infrastructure.
The reversal of Nvidia has affected the entire chipmaking industry. Over the last three trading sessions, the PHLX Semiconductor Index is down by almost 7 percent. On Monday, the tech-dominated Nasdaq composite fell by 1.1 percent.
Nvidia weighed down the stock market Monday. The blue-chip S&P 500 closed 0.3 percent lower despite gains across the board. The Russell 2000 index rose by 0.4 percent, despite the fact that it has been underperforming large-cap indices over recent months.
Manish Kabra of Societe Generale’s US Equity Strategy said that the sell-off by Nvidia on Monday was “a very healthy development for market”.
Kabra stated that “either the market rally expands or we create a bubble in tech stocks” which we do not yet have.
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