Nvidia, which briefly became the world’s most valuable company when its market capitalization topped $3 trillion last month, has lost hundreds of billions of dollars in value in recent days, then recovered.
While volatility in chip makers’ share prices has raised concerns about the sustainability of the stock market’s artificial intelligence (AI) boom, experts say Nvidia’s ups and downs are a “bump in the road” for the company as it continues to grow rapidly.
“Jensen, the Godfather of AI [Huang]”And with Nvidia leading the AI revolution, I view this recent stock sell-off as temporary,” Wedbush Securities analyst Dan Ives told The Hill, referring to the company’s co-founder and CEO.
Nvidia surpassed the $3 trillion market cap mark for the first time in early June, joining an elite club that includes only Microsoft and Apple. Less than two weeks later, the chipmaker briefly surpassed Microsoft to become the world’s most valuable company.
These milestones reflect rapid growth for Nvidia, which surpassed $1 trillion in market capitalization for the first time just over a year ago. By February, the company surpassed the $2 trillion mark. The company’s shares have risen more than 150% since the beginning of the year.
Nvidia’s success is due in large part to its graphics processing units (GPUs), which have played a central role in powering the AI boom, and demand for the company’s GPUs is growing as major tech companies race to develop and release their own AI models.
“They’re the only ones in town,” Ives said, adding that “their GPUs and chips are the new oil and gold of the tech world.”
That all changed last week when the chipmaker’s shares plummeted 16%, wiping $550 billion from its value — more than the combined market capitalizations of Walmart and Visa.
Nvidia’s stock price partially recovered in the days since, and its market capitalization has risen back above $3 trillion. The company is now the third-most valuable company in the world after Microsoft and Apple, with no rival coming close.
Jim Smigiel, chief investment officer at financial services firm SEI, said the chipmaker’s stock price volatility is unusual for such a large company.
Nvidia’s volatility is much higher than its closest competitors and the market as a whole. The company’s 20-day volatility is 44%, compared to 14% and 23% for Microsoft and Apple, respectively. The VIX, a measure of the market’s expected volatility, is currently at 12.09.
“It’s not unusual for small-cap stocks to have a volatility index that’s three or even four times the market,” Smigiel told The Hill, “but it’s highly unusual for it to be the largest stock in the index and the largest company in the world.”
Stacey Rasgon, a senior analyst at Bernstein Research who focuses on the semiconductor industry, said the chipmaker’s recent moves raise questions about the sustainability of its rapid growth.
“The big question people have about this strain right now is sustainability,” Rasgon said. “The numbers have grown so quickly that you can’t help but wonder if it can continue.”
Rasgon acknowledged that it’s impossible to know the answer, but said he’s not worried about Nvidia over the next year or two, suggesting the company’s recent fluctuations “don’t mean much.”
“I don’t think it says anything about the long-term outlook,” he said. “Stock prices have just gone up a lot and then down a little bit.”
Ives similarly downplayed recent stock price volatility as a “challenge” for chipmakers.
“There will be ups and downs in this rapid movement, not just for NVIDIA but for the technology industry,” Ives said, “but as we look to 2025, I see this as just another bump in the road to a $4 trillion market cap for NVIDIA.”
“In the spirit of the Summer Olympics, I think this will be an Nvidia, Microsoft, Apple race, but ultimately we will see three companies with a $4 trillion market cap over the next year, and Nvidia will likely be the first one to cross that threshold,” he added.
As of Thursday, Microsoft’s market cap was $3.42 trillion, followed by Apple at $3.4 trillion and Nvidia further back at $3.16 trillion.
