Nvidia, the leading artificial intelligence (AI) stock, has seen its market capitalization shrink by as much as $1 trillion (about 1,500 trillion won) over roughly 40 days. Some in the market see this as a sign that expectations for the AI boom, including for Nvidia, may be losing steam. But the prevailing view is that this is only a temporary lull, and that the AI rally will return.
According to Bloomberg on the 9th, Nvidia's market capitalization stood at $4.94 trillion as of the 7th. That marks a decline of about $788.5 billion from the $5.7285 trillion recorded on May 14 this year, when the stock hit an intraday all-time high ($235.47) on expectations of an explosion in global demand for AI computing. Nvidia's market cap had also fallen to $4.6639 trillion on June 26 this year, when the correction in semiconductor stocks began in earnest. That amounts to more than $1 trillion evaporating from its previous peak.
The company's valuation has returned to where it stood before the AI boom took hold. As of the 7th, U.S. time, Nvidia's 12-month forward price-to-earnings (PER) ratio was 18 times, the lowest level since early 2019. Nvidia's valuation is lower than that of the S&P 500 index (about 20 times) and the Nasdaq 100 index (about 23 times).
Market experts say the recent decline in Nvidia's valuation is unrelated to any deterioration in its earnings outlook. If anything, Wall Street analysts have been raising their profit estimates for coming quarters. According to Bloomberg's tally, the consensus (average market forecast) for Nvidia's revenue and net profit in fiscal 2027 (February 2026 to January 2027) is $393 billion (about 590 trillion won) and $228 billion (about 343 trillion won), respectively. These figures represent increases of 90% in revenue and 82% in net profit from the previous year. In particular, the net profit forecast has risen 13% over the past three months.
There is also a view that the streak of earnings-driven surprises AI-related stocks have shown will be difficult to see again for the time being. Christian Mueller-Glissmann, head of portfolio strategy and asset allocation research at investment bank Goldman Sachs, said in an interview with Bloomberg TV, "The chance that companies will post results beating market forecasts this season is still large, but expectations themselves have already been raised very significantly." He added, "Earnings alone will not be enough to reignite the AI rally."
Some point to the concentration in memory semiconductors, such as Micron, as a cause of Nvidia's weakness. Micron, an Nvidia supplier, has surged 229% this year on soaring prices for high-bandwidth memory (HBM), while shares of AMD and Intel have doubled or tripled. Even the strength in memory stocks has recently shown signs of slowing.
Still, with expectations for the AI boom remaining high, the prevailing view is that Nvidia and related stocks will climb again. Randy Hare, director of research at Huntington Bank, citing solid revenue growth and profitability, said, "The current (Nvidia) share price is undervalued," and predicted it would resume its upward trend within a few months.
