Nvidia shares slipped down 9.5% on Tuesday, marking the largest single-day market value loss ever for a US firm, as investors are more inclined towards practical implementation of Artificial Intelligence, leading to a widespread selloff in the market after disappointing economic data.
Nvidia's market value dropped by $279 billion, signalling that investors are growing more cautious about the emerging AI technology that has led to this year's stock market gains. The PHLX chip index plunged 7.75%, marking its largest single-day decline since 2020, reported Reuters.
The latest concerns about AI emerged after Nvidia showcased its quarterly forecast last Wednesday fell short of the set expectations by investors, who had fuelled a sharp 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," stated Todd Sohn, the ETF strategist, Strategas Securities.
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 elaborated, on Tuesday in a client note.
At its peak in July, Nvidia had nearly tripled in value in 2024. Despite recent losses, the stock remains up 118% for the year.
This week, investors will receive a range of labour market data, leading up to the crucial government payrolls report on Friday.
"There’s concern about what the job numbers are going to show, about seasonality," reveals Steve Sosnick, market strategist, Interactive Brokers.
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