Nvidia Stock Drops 25% from Peak, Hits 2-Month Low Amid $800 Billion Market Value Decline

Jul 30, 2024

Nvidia's stock has stumbled once again, diving to a two-month low and extending its summer slump as the semiconductor giant faces a significant market correction. On Tuesday, Nvidia’s shares fell 6% to $105 by late morning, sharply underperforming the Nasdaq Composite index, which dropped 1.2%. This marks a continuation of the tech stock’s recent troubles, pushing it further into correction territory.

Nvidia, renowned as a leader in artificial intelligence technology, is now trading over 25% below its peak of more than $140 per share from June. This decline has driven the stock towards its lowest closing price since May 23. The 15% drop in July represents Nvidia’s worst monthly performance since September 2022, when shares traded below $15 following a stock split.

The company’s market capitalization has also taken a hit, now standing at less than $2.6 trillion—down approximately $770 billion from its peak valuation of $3.3 trillion on June 18. This substantial drop effectively erases the equivalent of Tesla’s entire market value in just six weeks.

The decline in Nvidia’s stock is not attributable to a single event but rather a culmination of various factors. After a period of impressive gains, which saw Nvidia’s stock rise 110% year-to-date and 610% since the end of 2022, investors and fund managers have been cashing in on their profits, leading to a natural market correction.

Additionally, the semiconductor sector has faced a broader downturn, influenced by geopolitical tensions and trade policies, particularly those related to East Asia—a crucial region for chip manufacturing and sales. Former President Donald Trump’s recent hawkish comments on trade and defense policies have further unsettled the market.

Nvidia’s troubles also reflect a wider market trend where large technology firms are experiencing declines as investors rotate their portfolios. As the market anticipates the first interest rate cuts since 2020, funds have shifted towards smaller, lagging companies, leading to a drop in the stock prices of major tech giants like Apple, Microsoft, and Alphabet, all of which have seen declines of more than 7% from their recent highs.

Contrary View: Strong Financial Outlook

Despite the recent stock slump, Nvidia's financial prospects remain robust. The company is projected to be a major contributor to second-quarter earnings growth across the S&P 500, with analysts forecasting a 140% year-over-year increase in net income to $15 billion. The average target price for Nvidia’s stock is set at $134 per share, reflecting strong confidence in a potential rebound.

Nvidia, which was the standout performer in 2023 and the first half of 2024, will report its earnings at the end of next month. Analysts and investors alike will be keenly watching to see if the company can leverage its dominant position in AI technology to recover from its recent stock market challenges.