Shares of Nvidia (NVDA.O) plummeted 9.5% on Tuesday, marking the largest single-day market value decline ever recorded for a U.S. company.
This sharp drop comes as investor enthusiasm for artificial intelligence (AI) wanes amid a broader market selloff triggered by weak economic data.
Nvidia’s market capitalization shrank by $279 billion, signaling growing caution among investors regarding the AI technology that has significantly driven this year’s stock market rally. The PHLX chip index (.SOX) also experienced a significant decline, falling 7.75%, its steepest one-day drop since 2020.
The recent unease follows Nvidia’s quarterly forecast last Wednesday, which failed to meet the high expectations set by investors who have propelled the company’s stock to extraordinary heights. “Such a massive amount of money has gone to tech and semiconductors in the last 12 months that the trade is completely skewed,” commented Todd Sohn, an ETF strategist at Strategas Securities.
In addition to Nvidia’s troubles, Intel (INTC.O) saw its shares drop nearly 9% after Reuters reported that CEO Pat Gelsinger and other top executives plan to present a strategy to the company’s board aimed at divesting unnecessary businesses and restructuring capital spending.
The concern over slow returns on hefty AI investments has recently impacted other major tech companies as well. Microsoft (MSFT.O) and Alphabet (GOOGL.O) both experienced declines in their stock prices following their quarterly reports in July.
Tuesday’s market downturn coincides with the start of one of the historically worst months for U.S. stocks. Recent research has questioned whether the revenues from AI alone will justify the substantial capital expenditures in the sector. BlackRock strategists advised that investors need to assess whether companies are effectively utilizing their balance sheets and capital for AI investments.
Despite the recent losses, Nvidia’s stock has still surged 118% year to date, following a record high close in July, where it had nearly tripled its value for the year.
(via: Reuters)
