Chipmakers, led by market leader Nvidia (NVDA.O), opened a new tab, were expected to continue losses on Wednesday following a brutal sell-off in the previous session. This was a reflection of Wall Street’s growing unease about the stocks’ exorbitant valuations as confidence over AI cooled.
Following Tuesday’s 9.5% fall, which erased $279 billion from its market value—the worst single-day decline for a U.S. company—Nvidia saw a 1.3% decline in early trade.
Much of this year’s advances in the share market have been driven by enthusiasm for the development of artificial intelligence technology, which has raised chip company valuations to levels that some investors deem exaggerated.
Although Nvidia reported good quarterly sales growth, concerns about a sluggish payout from large AI expenditures have grown, and the company’s estimate last Wednesday fell short of high expectations.
The Asia head market strategist at J.P. Morgan Asset Management in Hong Kong, Tai Hui, stated that “the focus is now shifting to valuations in the U.S. equity market in general and some of the tech names have pretty large premium built in.”
About 20% of the value of Nvidia’s shares has been lost since the company’s June 18 peak. Its future price-to-earnings ratio is currently slightly below 30, which indicates a decrease in the company’s value. But since the beginning of 2023, the stock has increased by more than 650%.
“AI research as a whole is really promising. All that has to be considered is how businesses will be able to monetize all of this advancement and how we will be able to justify the current level of capital expenditure. All that investors are waiting for is that response.”
Applied Materials (AMAT.O), Broadcom (AVGO.O), Arm Holdings (O9Ty.F), opens new tab, and U.S.-listed shares of Dutch chip equipment manufacturer ASML were among the other semiconductor companies that saw early trading on Wednesday declines of 1% to 4%.
