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Nvidia Stock Falls 6.7%, Erasing $220 Billion Amid High Valuation Concerns

Jun 24, 2024, 09:57 AM

Nvidia, the leading AI chipmaker, has seen a significant decline in its stock value, falling 6.7% over the past two days and erasing over $220 billion in market capitalization. The stock is down another 1.2% premarket. Despite this, Nvidia remains the most expensive stock in the S&P 500, trading at roughly 23 times its projected sales over the next 12 months. The company is now the 3rd most valuable in the world. Nvidia's valuation has surged due to its dominant position in the AI sector, with its stock up 158% year-to-date as of June 18. However, concerns are growing about whether Nvidia's rapid growth can be sustained, given its high price-to-earnings ratio of 74 and price-to-sales ratio of 40. Analysts have noted that Nvidia's forward P/E ratio of 49 is lower than some of its competitors, like AMD, which has a forward P/E of 54. The recent stock decline has sparked discussions about the sustainability of Nvidia's valuation and its future growth prospects, especially considering the demand for its Blackwell products.