Top Line
Nvidia shares suffered a rare sell-off on Thursday, stripping the artificial intelligence engine of its short-held title as the most valuable public company on the planet and illustrating the sensitivity of broader stock indexes to Nvidia's price movements.
Nvidia's billionaire CEO Jensen Huang
Key Facts
Nvidia shares fell as much as 8% from an early morning all-time high to an afternoon low, before closing down 3.5% for the day at $131, reversing a 4% gain shortly after the open of trading on Thursday.
The intraday fluctuations caused Nvidia's market capitalization to fall by $277 billion to $3.27 trillion, which helped put the company on Tuesday behind more established tech company Microsoft in terms of market capitalization.
There was no clear trigger for Nvidia's stock price plunge, but it was likely a result of investors locking in profits after the stock price rose 170% since the beginning of this year and 800% since the beginning of last year.
Nvidia shares are up 40% in the last month alone.
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Why are stocks down today?
Importantly, Thursday's drop showed the broader market is sensitive to Nvidia shares. The S&P 500 fell 0.6% from a morning high of 0.3% by about 1:45 p.m., with Nvidia driving most of the decline. In effect, Nvidia's intraday decline wiped the equivalent value of Coca-Cola, the S&P's 27th-largest company by market capitalization, from the index. Coke has a market capitalization of about $270 billion.
Main Background
It's quite normal for stocks to fall after a surge like the one Nvidia recently experienced. Broad index funds have benefited far more than they have hurt from including Nvidia, and the $2 trillion in market capitalization it added in 2024 accounts for a third of the market-cap-weighted S&P's 15% gain so far this year. Nvidia, which makes much of the semiconductor technology most coveted for generative AI applications, reported a sixfold increase in profits in the most recent quarter as customers such as Microsoft and Google spend big on the technology.
Big numbers
$345,000. That's roughly what a $10,000 invested in Nvidia just five years ago would be worth today. The same amount invested in the S&P would be worth about $20,150.
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