Nvidia shares drop 9%, losing $279 billion in market value.
Nvidia shares have plunged 14% over the past three sessions following earnings results that fell short of high expectations. The company’s stock price had nearly tripled in 2024, reaching a record high close in July. Despite the recent decline, Nvidia’s stock remains up 118% year-to-date (YTD). The earnings miss, coupled with market volatility, has triggered a significant sell-off, reversing some of the impressive gains achieved earlier in the year. Investors are closely watching how the company will address these challenges and whether it can regain momentum in the coming months.
On Tuesday, Nvidia’s stock price plunged nearly 10%, marking the largest single-day decline in market value ever recorded for a U.S. company. The drop came as investor enthusiasm for artificial intelligence (AI) seemed to wane. Nvidia shares fell 9.5% to $108 each, resulting in a staggering $279 billion loss in market capitalization, according to Reuters. This unprecedented single-day fall in Nvidia’s market value reflects a growing caution among investors regarding the emerging AI technology that had been a significant driver of stock market gains throughout the year.
The substantial decline in Nvidia’s stock price followed a disappointing earnings report, which failed to meet the lofty expectations set by market analysts. Over the past three sessions, Nvidia’s shares have fallen 14%, reflecting the broader impact of the earnings miss on investor sentiment. Despite these recent losses, Nvidia’s stock has still appreciated by 118% year-to-date (YTD), driven by a nearly threefold increase in value earlier in 2024, culminating in a record high close in July.
The magnitude of Nvidia’s one-day market capitalization loss surpasses the previous record set by Facebook-owner Meta Platforms. On February 3, 2022, Meta Platforms experienced a $232 billion decline in market value after issuing a dismal forecast, marking it as one of the largest single-day declines in market value for a U.S. company until now, according to LSEG data. This comparison underscores the significant impact of Nvidia’s recent plunge and highlights the volatility of tech stocks in response to earnings reports and market conditions.
In the wake of the earnings report, the mean analyst estimate for Nvidia’s annual net income through January 2025 has risen to $70.35 billion, up from approximately $68 billion before the report. This increase in earnings estimates suggests that despite the short-term stock decline, analysts remain optimistic about Nvidia’s long-term profitability. However, the chipmaker’s stock is currently trading at 34 times expected earnings, a reduction from over 40 times expected earnings in June and aligning with its two-year average. This valuation adjustment reflects both the recent volatility in Nvidia’s stock price and broader market trends.
The broader technology sector also experienced a selloff on Tuesday, triggered by weaker-than-expected economic data. The Philadelphia Semiconductor Index (PHLX), which tracks chipmakers including Nvidia, plummeted 7.75% in its largest one-day drop since 2020. This broader market decline further exacerbated the challenges faced by Nvidia and other technology stocks, highlighting the interconnected nature of market trends and investor sentiment across different sectors.
The turbulence in Nvidia’s stock price and the broader technology sector underscores the sensitivity of high-growth companies to earnings performance and market expectations. As investors reassess their positions and market conditions evolve, Nvidia and other tech companies will need to navigate these challenges carefully to maintain investor confidence and capitalize on emerging opportunities in the AI and semiconductor industries. The coming weeks will be crucial for Nvidia as it works to address investor concerns and regain momentum in a volatile market environment.