The $3 trillion tech favorite has captivated investors, with its stock soaring about 750% since the start of 2023.
However, recent days have indicated that the company’s grip on Wall Street might be slipping, as a sudden bout of volatility briefly sent its shares tumbling.
Nvidia’s stock rebounded on Tuesday, but the episode reminded investors of a harsh reality: high-flying stocks can fall hard.
What’s happening: Nvidia has experienced a rollercoaster few months.
The chipmaker added a trillion dollars to its market cap, reaching $3 trillion in just 30 days from April 2024. To put this in perspective, it took Warren Buffett around 60 years to build Berkshire Hathaway into a nearly trillion-dollar company.
On June 18, Nvidia’s market value soared to $3.34 trillion, surpassing Microsoft to become the world’s most valuable company, with its stock seemingly on an unstoppable climb.
Why it matters: Nvidia is responsible for approximately 35% of the S&P 500’s total gains this year, according to Deutsche Bank analysts. This makes it one of the most influential companies ever listed on the S&P 500.
That’s why Nvidia’s sharp decline last week and on Monday was so shocking to investors. The stock lost a staggering $430 billion in value over just three days.
“First it was the Magnificent Seven. Then it was the Fab Four. Now, a single stock is driving most of the gains in the S&P 500,” said Jim Smigiel, chief investment officer at SEI.
Nvidia has been a compelling choice for investors.
“One question I get a lot is ‘why don’t I just put all my money in Nvidia.’ I cannot really argue with that question,” wrote Louis Navellier of Navellier & Associates in a recent note to investors.
Then came the drop.
“What we see with Nvidia is typical volatility, which is expected when a stock rises as quickly as Nvidia’s did,” Jochen Stanzl, chief market analyst at trading platform CMC Markets, told CNN on Tuesday.
But typical volatility can have major consequences when it involves a stock as prominent as Nvidia.
Emerging from the dip: Nvidia was the second-best performer in the S&P 500 on Tuesday, gaining nearly 7%, pushing its market cap back above the $3 trillion mark.
Still, the damage might already be done.
“Nvidia’s rich valuation is ludicrous — its market cap now exceeds that of the entire FTSE 100, yet its sales are less than 4% of that index,” said Emily Bowersock Hill, CEO and founding partner of Bowersock Capital Partners, referring to the 100 largest stocks listed in London.
Analysts at The Carlyle Group suggest that while artificial intelligence is transforming the world, the Nvidia stock bubble will eventually burst.
“The market seems quite adept at identifying transformational change but gets fixated on the hardware that facilitates it rather than the downstream value that hardware ultimately unlocks,” wrote Jason Thomas, Carlyle’s head of global research and investment strategy in a recent note.
Yes, but: Enthusiasm remains high.
“The fundamentals behind Nvidia’s growth remain the same,” Neil Roarty, an analyst at investment platform Stocklytics, wrote on Tuesday. “If you believe that the AI technology its chips are powering will completely recalibrate the global economy — and many do — then a $3 trillion market cap suddenly looks considerably more reasonable.”
The stock is up another 2.3% in premarket trading Wednesday.
Levi’s Under Fire After Supplier Laid Off Hundreds of Workers
Levi’s, a global brand that prides itself on standing up for “what’s right,” is facing scrutiny following a report from an independent labor monitoring group.
Critics accuse Levi’s (LEVI) of ignoring its own labor standards after continuing to work with a factory in Turkey that fired around 400 employees last year when they joined a union and went on strike over pay and working conditions.
Turkey is a crucial part of the global supply chain for apparel. The country exported about $30 billion worth of apparel and textiles last year, according to the Istanbul Exporters’ Association, a clothing industry group.
In a statement to CNN, Levi’s said it has “a longstanding commitment to supporting safe, productive workplaces for workers, and we take any allegations of efforts to curtail freedom of association extremely seriously.” The company continued sourcing jeans from the factory despite the mass firings to avoid further job losses, but the continuation of its relationship with the supplier depends “on management’s fulfillment of a detailed remediation plan that addresses freedom of association, working hours, and health and safety.”
