No US company has ever lost so much market value in one day. Observers interpreted this as a sign that investors are becoming more cautious about technologies related to artificial intelligence (AI). AI has contributed significantly to the price gains on the US stock exchanges this year.
Last week, Nvidia presented a quarterly forecast that did not meet investors’ high expectations. Nvidia shares lost 9.5 percent in a weak market environment. After the share price had mostly only known the direction up since the beginning of 2023 in the wake of the AI hype, the market value has multiplied since then and cracked the three trillion dollar mark for the first time in early June. At that time, Nvidia had thus overtaken Apple and was only ahead of Microsoft. Accordingly, a strong percentage loss in Nvidia’s share price is now reflected in three-digit billion losses in market value. By its record high in the middle of the year, the Nvidia share price had almost tripled in 2024. The last time there was a similarly high loss within a day was in early February 2022, when Facebook parent Meta Platforms lost 232 billion dollars in market value after a weak forecast.
“Trade completely distorted”
The PHLX chip index lost 7.75 percent on Tuesday. That was its biggest daily decline since 2020. Concerns that the high investments in AI could only pay off slowly have weighed on Wall Street’s most valuable companies in recent weeks. Shares in Microsoft and Google parent Alphabet traded lower after their quarterly reports in July.
“So much money has flowed into technology and semiconductor stocks over the past 12 months that trading is completely distorted,” said Todd Sohn, ETF strategist at Strategas Securities. Experts at fund provider BlackRock wrote in a note to clients on Tuesday that some recent studies cast doubt on whether revenues from AI alone would justify the wave of investment in the technology.
