Nvidia shares have tumbled by more than 16% in four trading days, erasing nearly $800 billion in market value, representing one of the steepest selloffs in its history. The selling has reverberated through the tech sector and prompted questions about whether a five-year market rally driven by AI can continue.
Market Impact and Valuation
Nvidia’s market capitalization fell from almost $5 trillion to about $ 4.47 trillion, which is the third-largest company in the world, after Apple and Microsoft. The stock ended the trading session at $181.62, down 3.43%. The day’s total traded volume was 143M shares. Nvidia’s fall rate is the steepest weekly decline in more than a year, and it has dampened investors’ confidence in the continued growth prospects for the AI sector.
Reasons Behind the Plunge
Several factors have contributed to the sharp drop in Nvidia’s stock price:
- U.S.-China Export Restrictions: Stricter U.S. export restrictions have constrained Nvidia in its ability to sell more advanced AI chips, including the H100 and upcoming Blackwell series, to China. China represents roughly 12.5% of Nvidia’s total revenue and about 20-25% of its data center sales. The company now expects to lose $8 billion in quarterly revenue as a result of those restrictions.
- AI Chip Delays: Delays in the rollout of next-generation AI chips have also spooked investors, who were counting on continued innovation to drive growth.
- Valuation Fatigue: Analysts said that Nvidia’s stock was “priced for perfection” after months of record gains. Any sign of trouble or slower growth has led to a big selloff, as investors wonder if the AI bubble is bursting.
Broader Implications
The selloff has hurt Nvidia, but it has also led to a decline in tech stocks in general, especially those closely tied to the AI boom. Analysts say that the AI-driven rally may be starting to show signs of weakness, and investors are now more careful about what the future holds for the sector.
Although Nvidia has incurred significant losses recently, it remains a major player in the AI chip market, and many experts still believe it has a promising future. However, the most recent correction serves as a reminder of the risks associated with high valuations and geopolitical uncertainty in the tech industry.
Conclusion
Although Nvidia has incurred significant losses recently, it remains a major player in the AI chip market, and many experts still believe it has a promising future. However, the most recent correction serves as a reminder of the risks associated with high valuations and geopolitical uncertainty in the tech industry.