Alex Rankine Markets editor
Shares in chip designer Nvidia, the darling of the artificial intelligence (AI) boom, have soared 160% so far this year. However, they entered a correction on Monday (defined as a 10% fall from a recent peak), tumbling more than 12% over three trading days to wipe more than $400bn off the market valuation, says Alvin Cabral in The National, an Emirati newspaper. The sell-off has seen Nvidia cede the title of the US’s biggest company back to Microsoft, after briefly surpassing the software giant last week.
Nvidia “has run very hot and priced a scenario that even many in the industry would never have felt possible at this stage in the cycle”, says Chris Weston of broker Pepperstone. Still, “AI has far further to go… [and] Nvidia remains the epicentre” of the investing world. The sell-off was driven by profit-taking after a “fantastic run”, says Ian King for Sky News. The shares were trading on a heady 45 times expected earnings last week.
A one-stock market
The US market has become dangerously reliant on Nvidia, says James Mackintosh in The Wall Street Journal. Nvidia alone has accounted for 44% of all gains in America’s S&P 500 index since the start of 2022. Over the same time period the average stock in the index has gone almost nowhere. It’s not just Nvidia, says Robert Armstrong in the Financial Times. The boom has lifted ten other semiconductor industry players, plus the five big tech giants. Between them, these AI-linked stocks have accounted for 56% of the US market’s gains since the current rally began last October. A broader upswing in non-tech shares has petered out since March, leaving things even more dependent on AI hype.
The semiconductor firms’ huge revenue comes from selling chips to the big tech firms for their AI projects – Nvidia’s success th
