Nvidia (NVDA) led the first day of trading for September sharply lower. NVDA stock lost 9.53%, which cost $279 billion in market value. Readers may dismiss the market cap loss. This does not represent a real loss unless an investor sells the position.
Besides the frightening market cap loss, the percentage drop in Nvidia in only a day is a warning. It raises the risk that AI stocks are in a bubble. Microsoft (MSFT), which is the second best to the chip giant in growing revenue from AI, closed at $409.44. MSFT stock peaked in July at $468.35. The July 5-11 peak is a potential “head and shoulders” bearish formation on the chart.
The SOXL ETF, which is a 3x Bull fund, lost 22.48% on Monday. Again, the size of the drop will cause speculators buying AI-related stocks at the peak to sell in frustration. Investors who held the position earlier this year or last year need not worry. They still hold a highly profitable position, at least on paper.
AMD dropped by 7.82% to close at $136.94. It might re-test the ~ $120 low set on August 6, 2024.
Among the AI-related names, Intel (INTC) has the highest risk. CEO Pat Gelsinger and his team may undermine shareholders with its plans to spin off its money-losing fab holdings. The government may stop the firm from this move since Intel earned billions in tax credits and support.
