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Nvidia Stocks plunged on Monday, officially putting the AI chip darling into correction territory, while the rest of the Nasdaq Composite rose to record levels.
The chip maker and de facto artificial intelligence market is up 166% this year as enthusiasm for the buzzy technology trend continues. However, shares have recently experienced a lull.
The stock has fallen 4.5% in December and is officially in correction territory, about 11% below its closing high of $148.88 reached last month. The definition of what a market correction includes can vary. Many generally view it as a decline of 10% or more from the all-time high.
The shares closed down 1.7%.
“You need Nvidia and you need their chips for the infrastructure,” said Keith Lerner, co-chief investment officer at Truist. “But I think what the market is also saying is that there are other beneficiaries beyond that. There’s a rotation within the Magnificent Seven that we’ve seen a few times this year.”
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Nvidia shares on Monday
Nvidia's recent underperformance could signal profit-taking on Wall Street after another banner year. The maker of graphics processing units that underpin large language models has benefited as data center demand has increased since ChatGPT launched in late 2022.
But there are some reasons for concern for the market leader and fundamental player among the big three averages. The market has continued to hit new highs as Nvidia underperforms. That could be a warning sign if the pattern continues, with Roth MKM noting that the $125-$130 level represents an important test for the stock and the overall market.
While Nvidia has struggled, other chipmaker stocks have done well Broadcom Reaches new highs on Monday. The stock rose about 11% during Monday's session, building on a 24% rally on Friday that took the stock to over $1 trillion in market cap following a strong earnings report.
The Nasdaq Composite hit a trading record on Monday without Nvidia's help.
“Broadcom's comments last week likely have momentum investors looking for even faster growth there,” said Kim Forrest, chief investment officer at Bokeh Capital Partners. “Momentum has driven this stock. I don’t think Momentum is going to destroy them quite yet, but Momentum is doing what Momentum does, which is looking for the higher price target.”
Other semiconductor stocks also rallied on Monday Micron technology This week, the company beat its quarterly results by about 6%. Marvell technology And Lam research rose by 3% and 2% respectively On semiconductors And Taiwan Semiconductor added around 1% each.