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Nvidia Corp's Shares Plummet 5.6%, Erasing $130 Billion in Market Value

Nvidia's shares plummet 5.6%, erasing $130 billion in market value, marking its biggest drop since May.

By Barry Stearns

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3/8, 16:28 EST
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Key Takeaway

  • Nvidia Corp's shares plummeted 5.6%, erasing $130 billion in market value, marking its biggest drop since May 31.
  • Despite the fall, Nvidia remains up over 70% in 2024, solidifying its position as the third-largest S&P 500 company.
  • The stock's rapid ascent was driven by optimism for AI chip demand, but a high relative-strength index signaled an overdue correction.

Profit-Taking Leads to Significant Drop

Nvidia Corp experienced its most substantial one-day decline in nine months, with shares falling 5.6% on Friday. This downturn marked the most significant drop since May 31, erasing approximately $130 billion in market value. This event is noted as one of the most considerable single-day value reductions in the history of the US stock market. Despite this, Nvidia's shares have seen a remarkable increase of over 70% in 2024, positioning it as the third-largest company in the S&P 500, following Microsoft Corp. and Apple Inc.

Momentum and Market Value

The chipmaker's stock had previously rallied, gaining more than 19% across six consecutive trading days. This surge was fueled by growing optimism regarding the sustained demand for Nvidia's chips, which are integral to artificial intelligence computing. Even after the Friday slump, Nvidia's market valuation stands at about $2.2 trillion. Earlier in the session, the stock had advanced as much as 5.1%, pushing the relative-strength index to above 85, the highest since November 2021, indicating the stock was ripe for a pullback.

Market Reactions and Indicators

The rapid ascent of Nvidia's shares earlier in the year was a response to the anticipated robust demand for its artificial intelligence computing chips. This optimism propelled the stock to significant heights, making it one of the most overbought stocks on Wall Street. The relative-strength index, a momentum indicator, reached its peak since November 2021 before the Friday decline, suggesting that a market correction was imminent.