Nvidia Stock Slump: Can the Company Bounce Back?

Business View
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Nvidia Stock Slump: Can the Company Bounce Back

Nvidia Stock Slump

A few days back, Nvidia had surpassed the world’s top two tech companies and appeared at the top. However, on Friday, 22 June, the position of Nvidia dropped by 3rd which brought a wave of sorrow among investors who were earlier happy with the rising price of Nvidia stock. Nearly the past two trading days, Nvidia’s shares have dropped more than 6%, resulting in a loss of nearly $200 billion in market value and the company’s title of most valuable in the world. The market capitalisation of Nvidia sits at roughly $3.1 trillion as per Bloomberg data.

With this fall, once again Microsoft has become the world’s most valuable company in the world. The market cap of Microsoft is $3.3 trillion followed by Apple which sits at $3.2 trillion. This data clearly shows the position of these companies in the race for the world’s most valuable company. The first position is held by Microsoft, then Apple and lastly Nvidia which earlier eclipsed the position of Microsoft. Undoubtedly, the investors of Nvidia are stressed after watching a slump in the share price but the company will surely bring new products or ideas to raise its capitalisation to make it again as the world’s most valuable company. 

As per reports, the stock of Nvidia dropped by 15% on Thursday, 20 June which made the company lose $500B in market cap. Besides, the CEO of Nvidia has recently sold $95M in shares. Now, the next question which is highly searched by the netizens is the reason for the sharp loss of Nvidia. This sharp reversal follows an earlier surge that saw Nvidia overtake its mega cap rivals. Analysts argue that the selloff was caused by a correction after the company had an explosive year-long run that saw its price nearly triple. No specific negative news has been released. It is vulnerable to these abrupt drops because of its quick climb. 

In a talk with Bloomberg, Russ Mould, an investment director at AJ Bell spoke about the slumps in Nvidia stock price. He said, “It’s just standard market fluctuations which can have a significant impact on valuations of large companies. However, he also emphasized the fundamentals of Nvidia that remain strong. Although there was expected to be some short-term volatility, analysts from Bank of America, led by Vivek Arya, believe that “any volatility is likely short-lived” even if they acknowledge that profit-taking is possible with this company. They maintain their buy rating, $150 price target, and top pick designation for Nvidia. 

Bullish sentiment persists, with Melius Research analysts led by Ben Reitzes increasing their price target to $160 from $125, marking their 5th rise this year. Reitzes argues that Nvidia is “better positioned than some SaaS ‘leaders’ who haven’t proven the impact of AI, “suggesting Nvidia could capture a large share of the enterprise software market. 

Portfolio manager and head of the Empiric LT Equity team at Allspring Global Investments, Neville Javeri also talked about the slumps in Nvidia stock price and said, “In the near-term, it is plausible that investors begin suffering from AI fatigue or become more broadly concerned about index concentration.” 

Nvidia is still up about 140% this year despite the downturn, ranking second among S&P 500 Index components in terms of performance, behind Super Micro Computer Inc., another popular AI play.

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