July 20, 2024

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All eyes are on Nvidia’s stock, so what’s been going on?

2 min read

In the past few days, Nvidia’s shares have lost billions in market value and the chipmaker has slipped off its perch as the most valuable stock on Wall Street. But the concerns may be short lived.

Nvidia’s stock had been falling since it briefly overtook Microsoft as Wall Street’s most valuable last week, and it was down nearly 13% in just three days, its worst such stretch since 2022. The company’s $2.97 trillion market capitalization puts it behind Microsoft, at $3.34 trillion, and Apple, at $3.22 trillion.

Because Nvidia has become so massive in size, the movements for its stock carry extra weight on the S&P 500 and other indexes. It was the heaviest weight by far on the S&P 500 Monday.

Market watchers would rather there be more diversification, having concerns seeing just Nvidia and a handful of other companies responsible for much of the S&P 500’s returns recently. They would prefer a market where many stocks are participating in the gains.

There’s been nearly insatiable demand for Nvidia’s chips to power artificial intelligence applications and the company has played a big role in the U.S. stock market’s recent record runs even as the economy’s growth slows under the weight of high interest rates. But the AI boom is moving at such a rapid pace that it’s raised worries about a possible bubble in the stock market and too-high expectations among investors.

Still, investor concerns may be calming, as Nvidia Corp.’s stock is up more than 5% in trading on Tuesday. The rebound for Nvidia helped the Nasdaq composite rise and head toward its first gain in four days.

Derren Nathan, head of equity research at Hargreaves Lansdown, said in a statement that while Nvidia’s stock has declined in recent days, one must also look at the bigger picture.

“The shares have still gained 190% on a 12-month view, so it’s no surprise some investors are locking in some profits,” he said.

Nathan also isn’t concerned about potential wider spread implications. “Although Nvidia…

2024-06-25 12:03:11

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