Nvidia's stock turns sharply lower with a $246 billion swing in market cap

By Emily Bary

Chip maker sees its largest downward intraday market-cap reversal on record

Nvidia Corp.'s run as the largest U.S. company by market capitalization got clipped after just one day, with shares of the chip giant reversing sharply lower in Thursday action.

Although Nvidia shares (NVDA) had been up as much as 3.8% earlier in the session and on pace to expand the company's market-cap lead over Microsoft Corp. (MSFT), they turned lower around midday and closed down 3.5%, which translates to a $3.22 trillion valuation, versus $3.31 trillion for Microsoft.

The last time Nvidia's stock gained at least 3% at its intraday peak but went on to end the session off at least 3% was on March 8, when it gained more than 5% at its high but ended more than 5% lower, according to Dow Jones Market Data.

The company's market value also took a $246 billion intraday swing, which made for its largest reversal on record by that metric, according to Dow Jones Market Data. The prior record was a $208 billion swing lower, seen on March 8.

Shares of other hot chip-sector momentum plays saw declines build in the session. Broadcom Inc. shares (AVGO) closed off 3.8%, while Micron Technology Inc. shares (MU) ended down 6% to log their worst single-day percentage drop since November 2022.

All three stocks had been on big year-to-date runs coming into Thursday.

Prior to the open, Mizuho desk-based analyst Jordan Klein mused about whether the continued surge in a handful of artificial-intelligence semiconductor stocks was a sign of "craziness."

The persistent upward momentum seemed to be vexing many technology investors, according to Klein, who said there was a lot of investor confusion out there about who has kept pushing the chip stocks higher.

There are "no good answers," he said, adding that it feels "like this is much more [a] retail, quant, passive rotation into tech winners as a means to play momentum and not miss out on the biggest potential event since [the dot-com boom] 25 years ago" - the current event being the rush of spending on AI investments.

With that in mind, Klein wrote that it "doesn't feel like this AI train is slowing down one bit." What does that mean for investors? Even though the tech market is showing signs of "craziness," Klein said he "would not recommend fighting it and rushing out of these winners," including shares of Nvidia, Broadcom and Micron.

Read: Nvidia is one of the 'three horsemen of AI.' Here are the others.

BofA's Vivek Arya, meanwhile, chimed in before the open with a bullish view of Nvidia's stock, saying in a report that its "steep climb makes it vulnerable to profit taking," though "any volatility [is] likely to be short-lived," in his view.

He's optimistic because companies are likely still in the early days of deploying hardware for generative AI, he said. The deployment cycle could last three to five years, he wrote, and it's only in the second year now.

Plus, Arya likes the potential of Nvidia's Blackwell chip lineup, which will start shipping later in 2024. The company has "solid demand/visibility across cloud customers," he wrote. Additionally, Nvidia is in the beginning stages of recognizing opportunities in sovereign AI, or the trend of countries spending to build their own AI infrastructure.

Opinion: Nvidia just created a new multibillion-dollar business from scratch

"Unlike the 'dot-com boom' that was funded by risky debt-taking, [generative AI] deployment is a mission-critical race between some of the best-funded (cloud) customers," Arya wrote.

He continues to rate Nvidia shares a buy and labels them a top pick.

Don't miss: Here's why AMD's stock was just dubbed a top pick

-Emily Bary

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06-20-24 1642ET

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