Nvidia’s market value plummets with downturn in tech stock

Nvidia, has experienced a significant drop in its shares, with a decrease of up to 8 percent on Tuesday. This decline was part of a broader sell-off in the chipmaking sector, which has been reignited in anticipation of several key earnings reports from major tech companies due this week.

Nvidia, renowned for its powerful processors essential for constructing artificial intelligence (AI) systems, has seen a staggering loss of nearly $750bn in market capitalisation. This comes just weeks after it momentarily claimed the title of the world’s most valuable publicly traded company.

The downturn wasn’t exclusive to Nvidia. Arm, a semiconductor designer that has also reaped the benefits of investor interest in AI stocks this year, saw its shares drop by 7 percent? in Tuesday’s intraday trading.

AI Giant loses $750 billion in market value

Despite the recent losses, both companies have seen their value more than double over the past year. This surge is largely attributed to significant capital investments by tech giants like Microsoft, Google, Amazon, and Meta, all aiming to enhance their AI infrastructure.

As Microsoft prepares to release its earnings report after Tuesday’s market close, some traders express concern. They fear that the profit expectations for AI-involved companies may be overly optimistic and that capital expenditure is outpacing returns.

The tech-centric Nasdaq Composite index fell by 1.9% in early afternoon trading, while the benchmark S&P 500 was down by 1%. Alongside Nvidia, shares in other chipmakers, including AMD and Intel — who are also set to report this week — were trading lower.

Emmanuel Cau, Barclays’ head of European equity strategy, noted, “There’s a lot of angst in the market ahead of reporting.” He added that investors are also treading carefully in light of upcoming interest rate decisions by the Bank of Japan, Federal Reserve, and Bank of England.

Tech companies have been on the selling end in recent weeks, causing the Nasdaq to fall about 9 percent from its mid-July peak. The index had its worst day since 2022 last week, following the release of Alphabet and Tesla’s results.

Cau explained that the shift away from tech stocks is primarily driven by investors awaiting clarity from macro data and earnings.