Don’t bet against Nvidia… this AI thing is only just starting, so the most valuable company on Earth will only get stronger from here.
On Thursday, investors expressed concern over the sustainability of the recent surge in semiconductor stocks linked to the artificial intelligence (AI) trend, leading to a notable sell-off in the sector. Nvidia, a leading producer of AI chips for data centers, experienced a significant fluctuation in its stock value. The company’s shares reached an all-time high of 140.76 in the morning but subsequently fell 3.5%, closing at 130.78.
Nvidia falls to Microsoft after 3.5% drop #stocks #stockmarket #invest #investing #trading #forex #money #financialfreedom #tigertrade #Nvidia #AI #Microsoft #JensenHuang #AMD #chips #Nikola #EV #Anthropic #OpenAl #wallstreet pic.twitter.com/RM7B1VXNG3
— Indonesia Stock Club (@IndoStockClub) June 21, 2024
This downturn was mirrored across the semiconductor industry, particularly among companies involved in the AI data center build-out. Notable firms such as Broadcom, Micron Technology, and Taiwan Semiconductor Manufacturing also saw declines. Broadcom’s shares declined 3.8% to close at 1,734.56 after setting a record high earlier in the week. Similarly, Micron Technology’s shares dropped 6% to 144.19 from a peak of 157.54, and Taiwan Semiconductor’s shares fell 2.4% to 175.38 after reaching a high of 184.86.
These movements occurred as Nvidia, Broadcom, Micron, and Taiwan Semiconductor reached what is known as the 20%-to-25% profit-taking zone. This term refers to a point at which stocks have risen significantly and investors might typically consider selling to secure gains. For instance, Nvidia’s stock had surged 44.5% since its breakout on May 23 before Thursday’s reversal.
Not unexpectedly Nvidia is finally reversing. Fun fact: That little drop in Nvidia’s market cap yesterday corresponds to more than $800 per #AMC share.#AMCNEVERLEAVING pic.twitter.com/s0IWdWeX4B
— Stefan Vikström (@vikstrom_stefan) June 21, 2024
Market analysts have noted a growing sentiment among investors that the valuations of AI-related semiconductor stocks may be excessively high. Jordan Klein, a trading desk analyst from Mizuho Securities, mentioned in a client note that investors are concerned the rally might not be sustainable and could end unfavorably.
Despite the day’s losses, some analysts remain optimistic about the long-term potential of these stocks. Vivek Arya from BofA Securities reiterated a buy rating on Nvidia, with a target price of 150, suggesting that any potential volatility in the stock price might be temporary. Arya emphasized that the technology industry is only in the early stages of a three-to-five-year cycle in deploying generative AI technologies.
Further weakness was observed in semiconductor stocks associated with integrating AI into network-edge devices, such as PCs and smartphones. Arm Holdings and Qualcomm also experienced declines in their stock values. Arm’s shares fell 7.7% to 160.77, down from a high of 177.31, while Qualcomm’s shares decreased by 5.1% to 215.47 after reaching 230.63.
#Nvidia Look at this big candle drop. Somethings going on Apple did the same thing pic.twitter.com/Mfkwjv2pD2
— Rick the Laser guy (@laserGuyRick) June 20, 2024
Major Points:
- Nvidia and other key semiconductor stocks related to AI saw significant declines after reaching record highs, with Nvidia dropping 3.5% to close at 130.78.
- The sell-off impacted companies like Broadcom, Micron Technology, and Taiwan Semiconductor, which also experienced notable drops in their stock values.
- These stocks had reached the 20%-to-25% profit-taking zone, leading to a sell-off as investors aimed to secure gains after recent surges.
- Analysts expressed concerns over inflated valuations in the AI semiconductor sector, warning that the current rally might not be sustainable.
- Despite the downturn, some analysts remain optimistic, highlighting the early stages of a multi-year deployment cycle for generative AI technologies.
Kirk Volo – Reprinted with permission of Whatfinger News
