US computer chip maker Nvidia has lost around 430 billion US dollars (£339 billion) in value over a three-day sell-off that ended its short-lived spell as the world’s most valuable tech giant.
The firm has fallen nearly 13% since briefly overtaking Microsoft last week as Wall Street’s most valuable stock, when it hit an all-time high of more than £3.3 trillion US dollars (£2.6 trillion).
Soaring demand for Nvidia’s chips to power artificial intelligence (AI) applications have helped the wider US stock market reach new records in recent weeks, despite uncertainty over the wider economy and as interest rates remain high.
But the frenzied AI boom has sparked concerns over a possible bubble in the stock market.
Nvidia lost more than 6% on Monday alone, shedding some 200 billion US dollars (£158 billion) in overnight US trading, dragging the wider tech-focused Nasdaq composite index down by 1.1%.
Derren Nathan, at Hargreaves Lansdown, stressed that Nvidia has still seen impressive gains in the past year, even with the recent falls taken into account.
He said: “To put things in context, (Nvidia) shares have still gained 190% on a 12-month view, so it’s no surprise some investors are locking in some profits, including CEO Jensen Huang who is reported to have sold around 95 million US dollars (£74.9 million) worth of stock in recent days.”
He added that “contrary to recent noise, markets are about more than just one stock”.
While the Nasdaq saw steep falls on Monday, the Dow Jones Industrial Average rose 260 points, or 0.7%, in a mixed session on Wall Street.
“Although Nvidia has sneezed, the wider market hasn’t caught a cold,” Mr Nathan said.
Nvidia is one of the key makers of computer chips required to power AI software, a technology which has exploded in popularity in recent years thanks to the emergence of generative AI products such as ChatGPT, and the rush to adopt the technology in order to keep up with the sector’s latest trends.
As a result, demand for Nvidia products has soared, boosting the company’s sales and profits as tech giants including Microsoft, Google, Meta, Amazon and Apple battle to create new AI-powered products.
The increasing focus on AI products from the biggest tech companies had seen some investors suggest that Nvidia’s earnings could continue to grow, which pushed up the company’s share price further.
Kathleen Brooks, research director at XTB, said she believed Nvidia’s recent share price plunge was a natural correction.
“Tech is a multi-year theme, especially artificial intelligence, thus we do not expect Nvidia’s stock price to fall off a cliff but a pullback is to be expected,” she said.
“Added to this, it is normal for investors to pause and consider if a stock is looking overvalued, even a stock like Nvidia.”
