Nvidia Loses $277 Billion as AI Leader Falls Behind Microsoft

Nvidia’s stock experienced a significant decline on Thursday, causing the artificial intelligence leader to lose its brief status as the world’s most valuable public company and highlighting the sensitivity of broader stock indexes to Nvidia’s price movements.

The stock plummeted by up to 8% from its early morning all-time high to its afternoon low, ultimately closing down 3.5% at $131. This marked a reversal from an earlier 4% gain shortly after the market opened. The intraday volatility wiped out $277 billion in Nvidia’s market value, reducing it to $3.27 trillion and placing it behind Microsoft after temporarily surpassing the tech giant’s market capitalization earlier in the week.

No specific catalyst for the selloff was identified, suggesting it was likely due to investors taking profits after Nvidia’s impressive 170% rally year-to-date and an 800% increase since the start of last year. Despite the dip, Nvidia’s stock remains up 40% over the past month alone.

Thursday’s drop demonstrated the broader market’s sensitivity to Nvidia’s performance. The S&P 500 turned a morning gain of 0.3% into a 0.6% loss by early afternoon, with Nvidia’s decline being the primary driver. Nvidia’s intraday slide essentially erased the equivalent of Coca-Cola’s market value, which is approximately $270 billion, from the S&P 500 index.

It is common for stocks to decline after sharp increases, such as Nvidia’s recent surge. Broad index funds have benefited more from Nvidia’s inclusion than they have been hurt. Nvidia’s addition in 2024 accounted for a significant portion of the S&P 500’s year-to-date gain. Nvidia, a leading producer of semiconductor technology crucial for generative AI applications, reported a sixfold increase in earnings in its most recent quarter due to high demand from major customers like Microsoft and Google.

$345,000: This is the approximate value today of a $10,000 investment in Nvidia made five years ago. By comparison, the same amount invested in the S&P 500 would be worth about $20,150.

This dramatic selloff underscores the volatility of tech stocks and the broader market’s reliance on major players like Nvidia to sustain momentum. Despite the setback, Nvidia’s long-term growth trajectory remains robust, fueled by its leadership in AI and semiconductor technology.