July 21, 2024

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Inside Nvidia’s $500 Billion Wipeout

2 min read

It looks like another volatile day for Nvidia shareholders. And given the company’s enormous influence on the entire S&P 500, they may not be the only investors facing big swings.

A head-snapping recap: The chip maker that rode the artificial intelligence boom to become the world’s most valuable public company last week has fallen into correction territory. It closed Monday down roughly 16 percent from its intraday high on Thursday, shedding more than $550 billion in value — roughly the size of Tesla’s market capitalization — offering the markets a tough reminder that the A.I. rally could become harder to sustain.

Investors are processing other points of concern. Mary Daly, the president of the San Francisco Fed, warned Monday of a slowdown in the labor market hitting the U.S. economy. “At this point, inflation is not the only risk we face,” she said.

Another big piece of data comes out on Tuesday: The Conference Board is set to release its monthly consumer confidence index. Markets will closely scrutinize that for households’ take on the economy.

That said, analysts are still bullish on Nvidia and A.I. The company has repeatedly blown past Wall Street’s forecasts as demand surges for its chips, which power Big Tech data centers and A.I. systems.

Last month, Nvidia said that its fiscal first quarter sales had grown more than threefold from the same period a year ago. That prompted Jensen Huang, the company’s C.E.O., to declare that “the next industrial revolution has begun.” Its stock then went on a tear, taking just 23 trading sessions to add $1 trillion to its market cap, according to Deutsche Bank.

Few on Wall Street have seen a run like Nvidia’s, making it hard to assess the company’s value.

Some see the company’s fall as a healthy readjustment. “While we do believe in A.I., there have been signs of over exuberance in the U.S. market over the last month,” Jim Reid, a strategist at Deutsche Bank, wrote in an…

Andrew Ross Sorkin, Ravi Mattu, Bernhard Warner, Sarah Kessler, Michael J. de la Merced, Lauren Hirsch and Ephrat Livni

2024-06-25 07:59:35

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