Nvidia experienced a market setback on Tuesday, with its shares falling by 9.5%, marking the largest one-day loss in market value for a U.S. company. This erased $279 billion from Nvidia’s market capitalization, and reflects growing investor caution about AI, a sector that has fueled much of the stock market’s gains this year. The broader market selloff followed economic data that did not meet expectations, contributing to concerns over the sustainability of AI-driven growth.
The PHLX Semiconductor Index dropped 7.75% on the same day, marking its steepest decline since 2020. Nvidia’s recent stock movement comes after the company’s quarterly forecast, delivered last week, failed to meet the high expectations set by investors. This has raised concerns about the longer-term profitability of investments in AI technologies, which have been heavily promoted by Nvidia and other major tech firms.
Other companies in the chipmaking sector also saw significant losses. Intel’s shares fell nearly 9%, following reports that the company’s executives are preparing a restructuring plan aimed at reducing non-essential business units and revising capital expenditures. The chip sector’s losses extended beyond Nvidia, as Broadcom, another firm linked to the AI boom, also saw its shares fall by 6.2% ahead of its quarterly report.
In recent weeks, investors have shown signs of hesitancy toward companies with large investments in AI, with Microsoft and Alphabet both seeing stock declines after their July earnings reports. Despite the downturn, Nvidia remains up 118% for the year, a reflection of its earlier rally, where its stock nearly tripled before its recent losses. The company’s recent market decline surpassed the previous record one-day loss of $232 billion, set by Meta Platforms in February 2022.
Despite the recent losses, Nvidia’s outlook for annual net income has improved, with estimates rising from $68 billion to over $70 billion for the fiscal year ending in January 2025. However, with the share price now lower, Nvidia is trading at a multiple of 34 times expected earnings, down from more than 40 times in June, but consistent with its average valuation over the past two years.
