Nvidia’s market cap drops $279 billion as Wall Street falls
Shares of AI giant Nvidia fell 9.5 percent on Tuesday, the biggest one-day drop in market value ever for a U.S. company, as investors tempered their optimism about artificial intelligence (AI) after a broad market selloff following weak economic data.
Nvidia lost $279 billion (approximately Rs 23,42,608 crore) in market capitalization, a key indication that investors are becoming more cautious about emerging AI technologies that have fueled much of this year’s stock market gains.
The PHLX chip index fell 7.75 percent, the biggest one-day drop since 2020.
The latest AI-related unrest comes after Nvidia released a quarterly forecast on Wednesday that fell short of investors’ high expectations, which had fueled a dizzying rally in the stock.
“There has been so much money flowing into technology and semiconductors over the last 12 months that the trade is completely skewed,” said Todd Sohn, ETF strategist at Strategas Securities.
Intel fell nearly nine percent after Reuters reported that CEO Pat Gelsinger and key executives are expected to present a plan to the company’s board of directors to shed redundant parts and overhaul capital spending at the struggling chipmaker.
Concerns about slow returns on hefty AI investments have plagued Wall Street’s most valuable companies in recent weeks, with shares of Microsoft and Alphabet falling after their July quarterly reports.
“Some recent research has questioned whether AI revenues alone will ultimately justify this wave of capex. When assessing individual companies’ AI capex, investors should consider whether they are leveraging their balance sheets and capital,” BlackRock strategists wrote in a client note on Tuesday.
At July’s record high, Nvidia had nearly tripled in value by 2024. Recent losses have seen its stock down 118 percent year to date.
The weakness in chip stocks on Tuesday was accompanied by big drops on Wall Street, with the Nasdaq down 3.3 percent and the S&P 500 down 2.1 percent.
According to CME’s FedWatch Tool, investors generally expect the Federal Reserve to cut rates by 25 basis points on September 18.
However, minority expectations for a 50 basis point rate cut rose to 37 percent from 30 percent after data on Tuesday showed manufacturing activity remains weak.
Investors will be getting a wealth of data on the labor market this week, highlighted by the government’s key employment report on Friday.
“There are concerns about the employment numbers and about seasonality,” warned Steve Sosnick, chief market strategist at Interactive Brokers.
The chip index is now up 14 percent in 2024, slightly less than the S&P 500’s 16 percent gain.
Nvidia’s record single-session loss in the stock market was bigger than the $232 billion (approximately Rs 19,47,972 crore) drop suffered by Facebook owner Meta Platforms on February 3, 2022, when the social media company issued a bleak forecast, according to data from LSEG.
Following Nvidia’s quarterly report last week, analysts’ average estimate for annual net profit through January 2025 rose to $70.35 billion (around Rs. 5,90,716 crore), from around $68 billion (around Rs. 5,70,980 crore) before last week’s report.
These higher earnings estimates, combined with Nvidia’s share price losses, mean the chipmaker is now trading at 34 times expected earnings, down from more than 40 times in June and in line with the two-year average.
Broadcom, another chipmaker benefiting from the rise of AI computing, fell 6.2 percent on Thursday ahead of its quarterly report.
© Thomson Reuters 2024
(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)
