London CNN —
Nvidia has lost its briefly worn crown as the world’s most valuable listed company after its stock plunged almost 13% in the past week.
The US chipmaker’s market capitalization hit $3.34 trillion on June 18 to surpass Microsoft’s but has since shed $430 billion. Now worth $2.91 trillion, Nvidia has fallen into third place globally, behind Microsoft (MSFT) and Apple (AAPL), which have a market cap of $3.33 trillion and $3.19 trillion respectively.
Shares in Nvidia (NVDA) tumbled 6.7% Monday, marking its third-straight day of declines and signaling that investors’ excitement over the crucial role the company is expected to play in the artificial intelligence revolution may be cooling after eye-popping gains in the stock.
“While we do believe in AI, there have been signs of overexuberance in the US market over the last month,” Jim Reid, a research strategist at Deutsche Bank, wrote in a note Monday.
Nvidia’s stock has been on a tear, soaring almost 139% over the past year. The company’s chips power AI systems, including generative AI, the technology behind OpenAI’s ChatGPT that can create text, images and other media.
“What we see with Nvidia is typical volatility, which is expected when a stock rises as quickly as Nvidia’s did,” Jochen Stanzl, chief market analyst at trading platform CMC Markets, told CNN. “A lot of good news has been priced in. Now investors have started to take profits and they seem to prefer selling stocks with the best year-to-date performance.”
Frenzy around the potential for AI to radically change the way we live and work — and make big returns for investors — has driven much of the stock market’s returns over the past year and a half.
Nvidia is a member of the so-called Magnificent Seven, the mega-cap tech companies whose shares greatly outperformed the broader US stock market rally last year. The S&P 500 index climbed 24.2% over 2023, compared with the average 111% rise in the stocks of the Magnificent Seven.
In a note published Monday, Deutsche Bank noted that, as a result of the seven stocks’ dominance, “the US stock market is close to being the most concentrated in history.” On Tuesday, the bank wrote that the decline in Nvidia’s stock the previous day had “held down US equity returns more broadly.”
The S&P 500 closed 0.3% down Monday, while the tech-heavy Nasdaq dipped 1.2%.
However, Derren Nathan, head of equity research at investment platform Hargreaves Lansdown, isn’t too worried about contagion.
“Although Nvidia has sneezed, the wider market hasn’t caught a cold, with a mixture of less extreme movements in both directions for the rest of the Magnificent Seven,” he wrote in a note Tuesday. “Meanwhile, in other sectors, US stocks saw gains (Monday) in energy, financials and utilities: a vote of confidence by investors in the health of the broader economy.”
