Nvidia lost more than $400 billion in three days: how far can it fall?

Nvidia is in trouble. The market’s favorite Artificial Intelligence (AI) It fell 16% between the maximum of $140.76 reached on June 20 to $118.11 with which it closed Monday’s session, losing some $430 billion in market capitalization along the way in just three days.

The movements are especially striking if you take into account that they occur just after the American technology company snatched Microsoft the scepter of the most valuable company on the market. The falls of the firm founded and directed by ‘Jensen’ Huang have also dragged down other similar companies, such as Qualcomm or Broadcom.

The fall of Nvidia: what analysts expect

“There was no bad news about the company’s fundamentals, no analyst downgrades, no unflattering forecasts, no rumors of slowing sales. It’s just that the end of the last quarter and the first half may have led to some investors to take profits and take a break“explained Ipek Ozkardeskaya, senior analyst at Swissquote Bank.

This thesis is also proposed by Richard Hunter, director of markets at Interactive Investor, who noted that there are “emerging signs” that it could have begun “a slight rotation of assets” since “a large concentration in large-cap technology stocks has been practically the sole driver of profits this year.

“In addition, the stellar rise of technological and artificial intelligence-related stocks inevitably reaches a point where investors take a breather and recalculate valuation levels. In recent days, the more traditional Dow Jones index has seen buying interest at the expense of the more technology-exposed S&P 500 and Nasdaq indices, as investors look for alternatives such as financial stocks and utilities , and more broadly in value stocks that have been left behind by the rise of technology,” Hunter explained.

Nvidia: how much can the stock go down?

All in all, the Interactive Investor expert believes that these corrections are “healthy”, although it is still “too soon to end” the current bearish streak. At the same time, the backdrop of the possible interest rate drops offers a “comforting” perspective, since “companies feel comfortable taking out loans to grow their businesses.”

In this sense, despite the fact that the Federal Reserve (Fed) has reduced its forecast of cuts to only one in all of 2024, the consensus still does not buy the central bank’s bluff and believes that there will be two cuts in the next six months.

For her part, Ozkardeskaya points out that it is impossible to know if the latest falls are the beginning of a more pronounced correction. “Yes, there has certainly been strong speculation in the exponential rise of Nvidia since the beginning of last year. And yes, strong rallies have often been followed by strong sales,” acknowledged the Swissquote Bank expert, who believes that it is “likely” that Nvidia”have to correct before finding a more reasonable valuation.

However, he explained that these setbacks could also be opening a purchase opportunity before Nvidia announces its second quarter results. And the market expects the semiconductor manufacturer to reveal sales of 28 billion in the accounts from April to June, which would represent an increase of more than double compared to last year.

“In any case, It’s too early to say that ‘Nvidiamania’ has come to an endbut given the amount of speculation surrounding the stock, we will see the price get worse before it gets better,” Ozkardeskaya noted.