Nvidia Stock Falls 13%, Biggest Three-Day Drop Ever Erases $430 Billion

Nvidia Corp. shares entered correction territory on Monday, the biggest three-day value loss for any company in history.

The AI-focused chipmaker experienced a 6.7% drop, its largest one-day percentage decrease since April.

This marks the third consecutive negative session for Nvidia, culminating in a total three-day loss of approximately $430 billion from its market capitalization.

The stock’s 13% decline over the period surpasses the 10% threshold that typically defines a correction.

This dramatic drop has not only affected Nvidia but also weighed heavily on the semiconductor sector, with the Philadelphia Stock Exchange Semiconductor Index falling 3% on Monday.

Other notable declines included Broadcom Inc. with a 4% drop, Qualcomm Inc. down 5.5%, and ARM Holdings Plc slipping by 5.8%.

US-listed shares of Taiwan Semiconductor Manufacturing Co. also shed 3.5%.

This significant market shift has reduced Nvidia’s valuation below the $3 trillion threshold, positioning it behind both Microsoft Corp. and Apple Inc. in terms of market size.

Nvidia briefly held the title of the world’s largest stock last week before this downturn.

“In the near-term, it is plausible that investors begin suffering from AI-fatigue or become more broadly concerned about index concentration,” said Neville Javeri, portfolio manager and head of the Empiric LT Equity team at Allspring Global Investments.

Despite the recent slump, Nvidia remains one of the top performers of the year, with shares up nearly 140% year-to-date, making it the second-best performer among S&P 500 Index components, just behind Super Micro Computer Inc., another favored AI stock.

Earlier in the year, Nvidia faced a similar drawdown of about 20% but quickly rebounded to achieve all-time highs. The current downturn, however, has amplified concerns about the company’s valuation.

Nvidia trades at 21 times its estimated sales over the next 12 months, making it the most expensive stock in the S&P 500 by this measure.

Nevertheless, it continues to be well-regarded on Wall Street, with nearly 90% of analysts tracked by Bloomberg recommending a buy and an average price target suggesting about a 12% upside from current levels.

“The momentum in Nvidia and AI stocks in general has been staggering,” said Charlie Ashley, portfolio manager at Catalyst Funds. “In terms of investing, I would not be a contrarian right now.”

Nvidia’s rapid ascent, driven by high demand for its AI processing chips, has been a double-edged sword, fueling both optimism and apprehension among investors.

The stock’s recent performance underscores the volatile nature of the tech market and the ongoing debate about the sustainability of its high valuations amidst economic uncertainties.