Excitement was short-lived. Holding the top spot is a challenge, and unfortunately, Nvidia has failed to meet it.
Earlier last week, the company overtook Microsoft and Apple to become the world’s most valuable publicly listed company, though it has since fallen back to third place.
Nvidia stock has plummeted 16% from its record high in just three trading sessions.
This sharp decline has wiped out over $500 billion from the chip maker’s lofty valuation of $3.4 trillion. By Tuesday, before the market opened, Nvidia’s worth had fallen to about $2.9 trillion, sending shockwaves through trading communities.
This marks the biggest three-day value loss for any company in history.
This week’s downturn follows Friday's disclosures that the chipmaker’s CEO and co-founder, Jensen Huang, sold almost $95 million worth of shares shortly before and after Nvidia became the world’s most valuable company.
Nvidia’s fall also dragged down the broader market. Technology shares saw a widespread selloff on Monday, with investors moving out of major stocks like Amazon, down 1.9%, Microsoft, down 0.5%, and AI server maker Super Micro, which dropped by 8.7%.
Nvidia’s rapid rise is responsible for about a third of the S&P 500 increase so far this year. The chip giant has gotten so big that it threatens to drag the broad-based Wall Street darling if a large enough pullback occurs.
The S&P 500, which includes 500 public companies, is valued at $46 trillion. The danger is not too obvious now, as Nvidia has yet to give back some of its formidable gains, but there are already signs of potential trouble.
The tech-focused concentration of the S&P 500 doesn’t end with Nvidia. The two other companies worth over $3 trillion each, Apple and Microsoft, have the same weight on the equity benchmark.
Together, Apple, Microsoft, and Nvidia account for a hefty 21% of the S&P 500’s total value, amounting to more than $10 trillion. This concentration significantly influences the large-cap rankings.
Some analysts have voiced concerns that the AI boom might have inflated into a bubble. A potential downturn in the artificial intelligence sector could lead to a harsh correction for investors, stripping these giants of their record-high valuations and causing the S&P 500 to tumble.
