It’s rare for a $2 trillion stock to fall in the absence of immediate news, but that’s exactly what happened Nvidia (NASDAQ: NVDA) Today.
The AI ​​chip leader’s shares were caught up in a broader AI sell-off after an analyst spotted it Super microcomputer (NASDAQ: SMCI)another AI stock leader, failed to report preliminary earnings, casting doubt on upcoming results.
That news sent Nvidia down 10%, while Supermicro lost 23.1% today.
The AI ​​momentum is shifting
Until this month, AI stocks had skyrocketed this year on the back of tremendous growth and excitement about the groundbreaking technology. At one point, Nvidia shares had nearly doubled so far this year, following another blockbuster earnings report in February, and its market capitalization was $2 trillion.
However, as this week’s sell-off indicates, much of these gains were driven primarily by sentiment and the fear of missing out (FOMO) of the AI ​​boom.
When stocks have already made hundreds of percent gains, like Nvidia and Supermicro, it doesn’t take much for those gains to settle back down, and that seems to be happening here.
A negative news story triggers a small amount of selling, leading to a flood as investors rush to lock in profits before a potential bubble bursts.
Is Nvidia stock in trouble?
The observation that drove the sell-off could easily be a non-event, as a Wells Fargo The analyst noted that Supermicro did not provide its usual preliminary revenue report, possibly implying that quarterly results were weaker than expected.
That’s purely speculation, but investors should also be aware that such an event would not normally cause a stock to plummet 23% as Supermicro did, but the stock has been highly volatile and is partly supported through momentum and sentiment.
As far as Nvidia is concerned, the GPU maker is a close partner of Supermicro, but Nvidia is much larger, meaning it isn’t particularly sensitive to Supermicro’s results.
Still, sentiment in the AI ​​sector tends to move these stocks in unison, and Nvidia has also benefited from the enthusiasm and high expectations for AI, so it’s not surprising to see the shares fall in line with Supermicro .
It’s too early to know if today’s sell-off is meaningful. Keep an eye on Supermicro’s third-quarter earnings report due after hours on April 30 as that will confirm or reverse today’s sell-off. Expect Nvidia to team up with Super Micro Computer after that news comes out.
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Wells Fargo is an advertising partner of The Ascent, a Motley Fool company. Jeremy Bowman has positions at Wells Fargo. The Motley Fool holds positions in and recommends Nvidia. The Motley Fool has a disclosure policy.
Why Nvidia Stock Plummeted 10% Today was originally published by The Motley Fool
