Stock Market

Nvidia Loses $200 Billion, Drops Out Of The Top Stock In The World

Nvidia’s valuation plummets from a peak of $3.3 trillion to less than $200 billion following a 7% decline.

TakeAway Points:

  • Nvidia’s stock dropped over 7% in two days, erasing $200 billion in market value after briefly becoming the world’s most valuable company.
  • The decline coincided with a broader market retreat and the expiration of options in a triple-witching session, increasing volatility.
  • Despite forming a bearish engulfing pattern, analysts are divided on its significance; Nvidia remains pivotal due to its AI-driven growth.

Fluctuations in Nvidia’s Market Value

Nvidia Corp. experienced a significant drop in its stock price over the past two days, falling more than 7% after a strong rally earlier in the week. This decline has reduced its market valuation by over $200 billion, bringing it down from a peak of $3.3 trillion, which had briefly made it the world’s most valuable company, surpassing both Microsoft Corp. and Apple Inc. 

Despite this sharp decline, traders noted that there were no fundamental issues driving the selloff. 

“Nothing has gone wrong at Nvidia, which reached the number one spot earlier this week. It’s just the usual fluctuations in the stock market, which, with such large companies, can wipe or add hundreds of millions or even billions of dollars to their market value.” Russ Mould, investment director at AJ Bell, commented.

The drop coincided with a broader market retreat influenced by the expiration of options in a triple-witching session, which often leads to increased trading volume and volatility as investors adjust their positions. Nvidia’s stock had nearly tripled in value over the past year, driven by strong performance and investor enthusiasm around artificial intelligence (AI).

Unfavourable Engulfing Pattern

On Thursday, Nvidia’s stock formed a “bearish engulfing” pattern, a technical chart pattern that can signal a potential reversal in the stock’s upward momentum. The pattern occurs when a large down candle follows a series of up candles, engulfing them. 

Mark Newton, head of technical strategy at Fundstrat, noted, “A one-day reversal to create a bearish engulfing pattern is typically important for the near-term to suggest that a turning point might be near. NVIDIA is getting closer towards suggesting some confluence in daily and weekly exhaustion.”

Despite the formation of this pattern, some analysts believe it may not be significant enough to indicate a major reversal. Mike O’Rourke, chief market strategist at JonesTrading, pointed out, “The reversal of the shares was 11 cents away from clearly registering a bearish engulfing pattern. Even still, it is not a pretty pattern. The momentum behind the remarkable run that commenced with the guidance it provided in May of last year may finally be running out of steam.”

AI Impact in the Market

Nvidia’s stock has surged more than 160% this year, largely due to the boom in artificial intelligence. The company’s prominence in the AI sector has made it a market bellwether, capable of influencing the broader market’s direction. 

Enthusiasm around AI and Nvidia has pushed the market higher in recent weeks, even as some investors expressed concerns about the lack of market breadth outside the technology sector.

The recent fluctuations in Nvidia’s stock highlight the volatility that can accompany high valuations and rapid growth. As Nvidia continues to play a pivotal role in the AI industry, its stock performance will likely remain a key indicator for market trends.

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