Semiconductors Down Due to Profit-Taking on Wall Street
Last Tuesday, the company reached a peak of $135.46, bringing its market value to $3.33 trillion.
NVIDIA, the star of the semiconductor sector, lost $429 billion in market value over three days. Analysts suggest the volatility will be short-lived.
The semiconductor sector’s boom may be ending due to overvaluation following significant price increases over the past year, analysts commented.
On Monday, Nvidia, the leading semiconductor company, dropped 6.68% to $118.11 per share, marking its third consecutive decline after being crowned the world’s most valuable company.
Last Tuesday, the company reached a peak of $135.46, bringing its market value to $3.33 trillion.
“The sharp rise in the stock makes it vulnerable to profit-taking, but we maintain that any volatility is likely to be short-lived,” Bank of America analysts wrote in a note last week.
Since Thursday, the stock has lost $429 billion in market value, falling to $2.90 trillion.
Nvidia’s decline affected the rest of the semiconductor sector on Monday.
Qualcomm had the second-largest loss, falling 5.5%, while Broadcom and Intel dropped 4% and 1.67%, respectively. Analog Devices (-1.12%), Texas Instruments (-0.83%), AMD (-0.61%), and Micron Technology (-0.38%) also saw declines on Monday.
The Philadelphia Semiconductor Index (SOX), which includes the 30 most important companies in the sector, lost 3% in the first session of the week.
Overvaluation in the semiconductor sector means that any negative news, no matter how small, can significantly impact prices. Last week, it was revealed that construction at Micron Technology’s factory in Syracuse, New York, was delayed due to environmental challenges, such as the discovery of endangered bats and federally regulated wetlands and streams on the site, preventing the company from cutting down trees until November.
To maintain growth levels that justify current valuations, companies like Nvidia would need to continue growing at double or even triple-digit rates, which is unsustainable in the long term, considering that a mature company grows at around 3%.
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