Nvidia’s (NVDA) market capitalization fell by a record $589 billion on Jan. 27 as the company’s share price closed 17% lower on fears that its dominance in artificial intelligence (AI) might be challenged.
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Worries that Chinese AI start-up DeepSeek has found a way to create advanced AI models using less sophisticated and cheaper microchips and processors led NVDA stock to suffer its biggest one-day decline since the Covid-19 pandemic struck in March 2020.
In the process, Nvidia shed nearly $600 billion from its market capitalization, pushing it below its previous valuation of more than $3 trillion. The one-day market cap loss is now the biggest in U.S. stock-market history. Interestingly, Nvidia held the previous record for one-day market cap loss after its stock fell 9% last September, wiping out $279 billion in value.
Meta Platforms’ (META) $251 billion loss on Feb. 3, 2022 is the third-biggest daily loss in market history.
Dragging the Market Lower
The sharp selloff in NVDA stock dragged the entire technology sector lower, with the Nasdaq Composite index losing 612 points, or 3.07%. Nvidia selloffs have now caused eight of the top 10 biggest one-day drops in the S&P 500 index, based on market value, according to data from Bloomberg. The benchmark S&P 500 index finished trading on Jan. 27 down 1.46%.
NVDA stock tanked as DeepSeek’s low-cost approach to developing AI models raised concerns that U.S. companies have poured too much money into developing their own AI applications, most of which are powered by Nvidia microchips and processors. With the latest selloff, Nvidia is now the third most-valuable publicly traded company, behind Apple (AAPL) and Microsoft (MSFT).
Is NVDA Stock a Buy?
Nvidia’s stock currently has a consensus Strong Buy rating among 39 Wall Street analysts. That rating is based on 36 Buy and three Hold recommendations assigned in the last three months. The average NVDA price target of $177.56 implies 51.66% upside from current levels.
