After losing roughly $1 trillion in market value in less than two months, Nvidia Corp's stock is the cheapest it's been since before the AI boom kicked off and sent the shares into the stratosphere. The chipmaker's graphics processing units, or GPUs, still dominate the artificial intelligence data center market. But the stock has tumbled 16% since hitting an all-time high on May 14, as investors rejigger the AI trade by ditching Nvidia in favour of competing semiconductor manufacturers, particularly those in the memory market.
The selloff has Nvidia, not long ago the hottest stock on Wall Street, trading at 18 times earnings projected over the next 12 months, according to data compiled by Bloomberg. The last time the shares were this inexpensive was early 2019. To get a sense of how dramatically it has fallen off, the erstwhile market leader is now cheaper than the S&P 500 Index, which is priced above 20 times forward earnings, and the technology-heavy Nasdaq 100 Index, which is at almost 23 times.
Nvidia's shrinking valuation isn't the result of a deteriorating outlook. On the contrary, Wall Street analysts have been raising their profit estimates for the coming quarters. Instead, the selloff shows how much the AI trade is shifting to other areas, such as memory and storage stocks like Micron Technology. Even Nvidia rivals such as Advanced Micro Devices and Intel have seen their share prices double or even triple this year.
