NVIDIA Corp. shares fell by 4.8% on Monday, pushing the AI-focused chipmaker into correction territory after a three-day decline, resulting in a total drop of 12%. This decline also affected other chipmakers, with the Philadelphia Stock Exchange’s semiconductor index falling by up to 2.2%. Companies like Broadcom Inc., Semiconductor Manufacturing in Taiwan Co., and Qualcomm Inc. all saw decreases of at least 2%.
The recent drop in stock price caused Nvidia’s market capitalization to decrease by over $400 billion, bringing it back below the $3 trillion threshold and ranking it below both Microsoft Corporation and Apple Inc. Although last week it temporarily held the title of the world’s largest stock.
Despite the recent decline, Nvidia is still up more than 140% for the year, making it the second-best performer among S&P 500 constituents after Super Microcomputer Inc. The company experienced a similar drop of around 20% earlier in the year but quickly rebounded to hit all-time highs.
While investors have been drawn to Nvidia due to the high demand for its chips used in AI processing, concerns about the stock’s valuation have been raised given its significant rally. The stock currently trades at nearly 23 times estimated sales over the next 12 months, making it the most expensive in the S&P 500 by this measure. However, it is still highly regarded on Wall Street, with nearly 90% of analysts recommending buying and the average analyst price target suggesting a 10% upside from its current levels.
Charlie Ashley, a portfolio manager at Catalyst Funds, commented on the recent momentum in Nvidia stock and AI stocks in general, stating that he would not go against the trend for investment at this time.
Overall, Nvidia’s recent decline has raised concerns about the stock’s valuation and the impact of AI fatigue on investors, but the company remains highly regarded on Wall Street despite being the most expensive stock in the S&P 500 by sales measure.
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https://fortune.com/2024/06/24/nvidia-stock-correction-nvda-selloff-market-cap-below-3-trillion-ai-chips/