Nvidia loses a record $279 billion in market value as Wall Street falls

Shares of AI behemoth Nvidia (NASDAQ:NVDA) fell 9.5% on Tuesday, the steepest single-day fall in market value for a U.S. business, as investors lowered their expectations for artificial intelligence amid a broad market selloff following weak economic data.

Nvidia's market value fell by $279 billion, indicating that investors are becoming more concerned about new AI technology, which has driven much of this year's stock market advances.

The PHLX chip index fell 7.75% in one day, its largest drop since 2020.

The latest AI concerns arise after Nvidia issued a quarterly estimate last Wednesday that fell short of the lofty expectations of investors, who have fuelled a dizzying increase in its stock.

"So much money has gone to tech and semiconductors in the previous 12 months that the trade is entirely skewed," said Todd Sohn, an ETF strategist at Strategas Securities.

Intel (NASDAQ:INTC) fell nearly 9% after Reuters reported that CEO Pat Gelsinger and other executives are set to deliver a strategy to the company's board of directors to remove unneeded operations and overhaul capital spending at the struggling chipmaker.

Worries about late payoffs from large AI investments have hounded Wall Street's most valued businesses in recent weeks, with shares of Microsoft (NASDAQ:MSFT) and Alphabet (NASDAQ:GOOGL) falling after their quarterly reports in July.

"Some recent study has questioned whether the earnings from AI alone would finally justify this flood of capital investment in it. When evaluating individual businesses' AI capex, investors should analyze whether they are making the greatest use of their balance sheets and money," BlackRock (NYSE:BLK) strategists wrote in a client note on Tuesday.

Nvidia had nearly tripled in 2024 as of July's record high closing. Its recent losses have left it up 118% year to date.

Tuesday's slump in tech equities was mirrored by broad falls on Wall Street, with the Nasdaq plunging 3.3% and the S&P 500 falling 2.1%.

According to CME's FedWatch Tool, most investors expect the Federal Reserve to decrease interest rates by 25 basis points in its policy statement on September 18.

However, minority estimates of a 50 basis point decrease increased to 37% from 30% after data on Tuesday showed that manufacturing activity remains lackluster.

Investors will receive a slew of labor-market data this week, culminating in Friday's critical government payrolls report.

"There is fear about what the job data will reflect, about seasonality," said Steve Sosnick, a market strategist at Interactive Brokers (NASDAQ:IBKR).

The chip index is already up 14% in 2024, close behind the S&P 500's 16% rise.

According to LSEG data, Nvidia's record one-session stock market value drop was bigger than Facebook-owner Meta Platforms' (NASDAQ:META) $232 billion decline on Feb. 3, 2022, when the social media company gave a bleak outlook.

Following Nvidia's quarterly release last week, the average analyst projection for yearly net income through January 2025 increased to $70.35 billion from approximately $68 billion before to the announcement.

These higher earnings forecasts, combined with Nvidia's share losses, have the chipmaker selling at 34 times projected earnings, down from more than 40 in June and in line with its two-year average.