Some predict that NVIDIA’s stock price decline, which had risen sharply, could be the beginning of a “trend decline,” not a “temporary adjustment.” Kevin Mann, president and chief investment officer (CIO) of Henion & Welsh Asset Management, pointed out, “The valuation of some tech stocks, which have soared since the pandemic, has begun to raise questions.”
The 12-month leading stock price/earnings ratio (PER) of semiconductor stocks that make up the S&P 500 index is 28.5 times, far exceeding the 10-year average (16.5 times). For Nvidia, despite the fall in the stock price this month, it still remains 23.5 times higher.
Experts pointed out that the market’s interest in the AI theme, which was the driving force behind Nvidia’s stock price rise, has also waned. “Nvidia shares have lost momentum,” said King Lip, chief strategist at asset management firm Baker Avenue Wells Management. “The market’s enthusiasm for AI-related stocks, which had been on the rise with AI themes, is cooling off.”
Meanwhile, as NVIDIA reported better-than-expected earnings in the second quarter following the first quarter of this year, some predicted that the stock price would surpass $1,000 per share. “Nvidia will lead the market targeting fast-growing industries (such as AI),” Peter Cohen, an IT consultant, said in a column published in Forbes last month, “Nvidia’s stock price will reach $1,000.”
The shock from TSMC, the world’s largest semiconductor foundry (consignment production) company, also encouraged the stock price to fall. TSMC believes that the recovery of demand for semiconductors is progressing at a much slower pace than expected, and has asked major equipment suppliers such as ASML in the Netherlands to delay delivery. As orders have not increased as expected due to the prolonged economic downturn, the time of operation of the plant being built in Arizona, U.S., has been delayed by about a year to 2025.