Nvidia Stock Plunges 10% Amid Broader Tech Sell-Off

Nvidia stock plunges 10%, leading broader tech sell-off amid concerns over high valuations and interest rate hikes. Investors cautious as AI-driven gains may have been driven more by sentiment than fundamentals.

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Nvidia Stock Plunges 10% Amid Broader Tech Sell-Off

Nvidia Stock Plunges 10% Amid Broader Tech Sell-Off

Nvidia's stock price dropped sharply by 10% on Friday, marking its worst single-day performance since March 2020, as investors perceived heightened risk in big tech shares. The steep decline came amid a broader sell-off in the technology sector, with the S&P 500 and Nasdaq Composite indexes falling for the sixth consecutive day.

The tech-heavy Nasdaq Composite slid 2.1%, falling more than 5% for the week, while the S&P 500 suffered its worst losing streak since October 2022. Nvidia led the semiconductor sell-off, with its stock falling to the lowest close since February. The company's market capitalization dipped below $2 trillion for the first time since February 29.

Other major tech stocks, including Amazon, Apple, and Meta, also saw significant declines. The sell-off was driven by dimming hopes for an upcoming interest rate cut and geopolitical uncertainty. Disappointing earnings from Netflix further weighed on hopes that quarterly reports would help revive the equity rally.

Why this matters: The sharp drop in Nvidia's stock and the broader tech sell-off highlight growing concerns about the valuations of big tech companies. As interest rates remain high and geopolitical tensions persist, investors are reassessing the risks associated with these stocks, which could have implications for the overall market.

Investors remain cautious as a growing number of Federal Reserve officials have expressed a more hawkish stance due to hotter-than-anticipated inflation data in the first quarter. Economists and strategists now expect the Federal Reserve to wait until at least September to lower the cost of borrowing, as inflation has been more problematic than anticipated.

The sell-off in Nvidia and other AI-related stocks, such as Advanced Micro Devices and Micron Technology, indicates that much of the recent gains were driven by sentiment and fear of missing out on the AI boom rather than fundamentals. "The market remains highly contested, with competitors like Dell and Hewlett Packard Enterprise planning to build systems using Nvidia's latest generation of Blackwell graphics processing units," according to the Financial Times report.

Key Takeaways

  • Nvidia's stock price dropped 10%, its worst single-day since March 2020.
  • The tech-heavy Nasdaq Composite fell 2.1%, down over 5% for the week.
  • Disappointing earnings from Netflix weighed on hopes of a market revival.
  • Investors are reassessing risks of big tech stocks due to high rates and tensions.
  • The AI-related stock sell-off indicates gains were driven by sentiment, not fundamentals.