Nvidia loses $1 trillion in market value as AI growth meets with investor skepticism

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Nvidia has lost $1 trillion in market value over the last couple of months, falling from its sky-high valuation when the AI sector was in a boom phase, according to Bloomberg. The company has benefited greatly from the AI boom over the previous quarters. 

Since 2022, Nvidia’s core segment has moved from graphics cards to data centers. According to TIKR terminal, the company’s LTM gross margin was estimated at 74.1%, a reflection of how strong profitability has been for NVIDIA, a company that has been selling industry-grade AI infrastructure products to large scale clients. 

The company’s latest earnings report shows that the company has earned $81.6 billion, of which data center sales were $75.2 billion, representing an increase of 85% on a year-over-year basis and an EPS of $1.87 which beat Wall Street estimates. 

The update comes after American stock indexes rose in value on Thursday across all benchmarks by the following amounts:

• S&P 500 +0.85%
• NASDAQ +1.66%
• Dow Jones +0.27%
• Russell 2000 +1.28%

Sectorally, the outlook was bullish as well. 

• Technology +2.18%
• Health Care -0.08%
• Real Estate +0.18%
• Financials +1.04%
• Utilities -0.51%
• Communication Services +0.96%
• Consumer Discretionary +1.34%
• Consumer Staples -1.41%
• Industrials +0.38%
• Energy -1.40%
• Materials +0.20%
• Aerospace & Defense 0.00%
• Biotechnology +0.51%
• Medical Devices +0.04%
• REITs +0.11%
• Semiconductor +3.50%
• Software +1.51%

According to Bloomberg, a majority of analysts covering Nvidia held bullish ratings on the stock, citing the company's competitive position in data centre infrastructure, though analyst sentiment is subject to change and does not constitute a guarantee of future performance. 82 Bloomberg analysts currently cover NVIDIA and only four have either hold (3) or sell ratings (1) for the stock. 

Summary

In the view of SGFX research desk, Nvidia still has a number of risks to contend with which include a further bloating of competition in the sector, losing its position as a premium chip provider to another company, supply-chain disruptions that could reduce the incoming supply of materials, and a rise in semiconductor costs. 

Research references

• Nvidia’s $1 Trillion Slide Sends Valuation to Pre-AI Boom Levels - Bloomberg
• TIKR terminal data 
• NVIDIA Announces Financial Results for First Quarter Fiscal 2027 | NVIDIA Newsroom

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