Thursday 20 June the shares of Nvidia they experienced a rare bad day. The company, the engine of evolution towards artificial intelligence, thus surrendered the title of the most valuable listed company in the world, held for two days. The day also showed how sensitive stock indexes, in general, are to Nvidia’s price movements.
The main facts
- Nvidia shares lost 8% from the historic high reached at the beginning of the session to the low reached in the afternoon. During the day, the stock fell by 3.5%, to $131, despite the +4% it reached shortly after the opening.
- Nvidia’s market value therefore decreased by 277 billion dollars, reaching 3,270 billion. The company is now behind Microsoft in capitalization, having overtaken it on Tuesday.
- There was no clear trigger to the mass sale. A sign that it was probably just the desire of investors to monetize, after the stock rose 170% since January 1st and 800% since the beginning of last year.
- However, the stock still registers +40% compared to the value of a month ago.
Nvidia drags down Wall Street
The decline across Wall Street demonstrated how the market is now sensitive to the performance of Nvidia’s shares. The S&P 500 index, after reaching +0.3% in the morning, fell to -0.6% around 1.45pm (New York time), and the decline was almost entirely attributable to Nvidia . Essentially, in terms of impact on the overall value of the S&P 500, the loss recorded by Nvidia during the day was the equivalent of eliminating Coca-Colathe 27th most valuable company on the index, with a market capitalization of approximately $270 billion.
The context
It’s completely normal for a stock to drop after a rapid rise like Nvidia’s. Index funds have benefited from Nvidia far more than they have been hurt in cases like the one on Thursday, June 20. Nvidia’s $2 trillion increase in market capitalization is responsible for a third of the S&P 500’s year-to-date 15% increase. Nvidia, which produces the majority of the most sought-after semiconductors for generative artificial intelligence applications, reported a six-fold increase in revenue last quarter, driven by purchases from customers such as Microsoft and Google.
The figure
345 thousand dollars. This is the value that an investment of 10 thousand dollars in Nvidia shares made exactly five years ago would have today. If you had invested the same amount in the S&P 500, you would have $20,150 today.
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