Nvidia Shares Plummet 9.5% in Historic Market Value Drop Amid AI Concerns
TEHRAN (Tasnim) - Shares of Nvidia fell 9.5% on Tuesday, marking the largest single-day decline in market value for a US company, as investors reassessed their optimism about AI amid a broader market selloff.
Nvidia's market capitalization dropped by $279 billion, according to Reuters, signaling growing caution among investors about the AI technology that has driven much of this year's stock market gains.
The PHLX chip index saw a steep 7.75% decline, its largest one-day drop since 2020.
Investor jitters about AI followed Nvidia's recent quarterly forecast, which failed to meet the high expectations that had fueled a significant rally in its stock.
"Such a massive amount of money has gone to tech and semiconductors in the last 12 months that the trade is completely skewed," commented Todd Sohn, an ETF strategist at Strategas Securities.
Intel also experienced a significant drop, falling nearly 9% after reports surfaced that CEO Pat Gelsinger and key executives are expected to present a plan to cut unnecessary businesses and revamp capital spending.
Recent weeks have seen increased concern on Wall Street about the slow returns from substantial AI investments, affecting shares of Microsoft and Alphabet following their quarterly reports in July.
"Some recent research has questioned if the revenues from AI alone will eventually justify this wave of capital spending on it. When assessing AI capex by individual companies, investors must consider if they are making the best use of their balance sheets and capital," BlackRock strategists noted in a client report.
Despite recent losses, Nvidia's stock remains up 118% year to date, although it has now retreated from its July record high close, where it had nearly tripled in 2024.
The decline in chip stocks coincided with broader market weakness, with the Nasdaq falling 3.3% and the S&P 500 dropping 2.1%.
Investors are largely anticipating a 25 basis point interest rate cut by the Federal Reserve in its upcoming policy announcement, though expectations of a 50 basis point cut rose following data showing ongoing softness in the manufacturing sector.
Broadcom, another chipmaker benefiting from the AI computing boom, fell 6.2% ahead of its quarterly report on Thursday.