Nvidia stock tests bulls after $1 trillion valuation drop

Nvidia stock has shed about $1 trillion in market value since mid-May as investors rotate from AI GPUs toward memory chip names. The drop has pushed the chipmaker’s valuation back to levels last seen before the AI boom.

The shares are down 16% from their May 14 record, despite Nvidia remaining the dominant supplier of graphics processors used in artificial intelligence data centers. Market data cited in the source showed the stock trading at 18 times expected earnings for the next 12 months, below the S&P 500 at more than 20 times and the Nasdaq 100 near 23 times.

AI trade leaves one leader

The reset is less about collapsing earnings expectations than about where investors want AI exposure next. Profit forecasts for Nvidia have moved higher, while enthusiasm has shifted toward memory, storage and alternative chip suppliers.

Michael Bailey, director of research at Fulton Breakefield Broenniman, put the mood plainly: “Sentiment has moved on.” He said companies with lower starting expectations, including memory names, have pulled attention away from the former center of the AI trade.

That shift has been stark inside the semiconductor group. Nvidia is up 5.6% in 2026, trailing the S&P 500’s 9.6% gain and the Nasdaq 100’s 16% rise, while the Philadelphia Stock Exchange Semiconductor Index has advanced 74%.

Memory stocks seize momentum

Micron Technology has led the chip index, rising 229% in 2026 after gaining 239% in 2025, as high-bandwidth memory prices climbed. Nvidia, by contrast, ranks near the bottom of the 30-member semiconductor benchmark after being one of its strongest performers in 2024.

Advanced Micro Devices and Intel have also gained ground with investors, with their shares doubling or tripling this year, according to market data cited in the source. The move reflects a broader effort to own more pieces of the AI supply chain rather than concentrate exposure in one name.

Large customers are adding another pressure point. Alphabet and Amazon are increasingly using custom chips of their own, creating a longer-term question over how much of the AI infrastructure budget stays with Nvidia.

The company’s market position has not broken. Data cited from Bloomberg Intelligence showed Nvidia held 97% of the server GPU market at the end of 2025, up from 95% a year earlier, as data-center demand stayed strong.

Earnings forecasts keep bulls engaged

Analysts still expect unusually fast growth. Nvidia is projected to generate $228 billion in profit on $393 billion in sales in fiscal 2027, which ends Jan. 31, representing growth of 90% and 82%, respectively.

The profit estimate has risen 13% over the past three months, one reason many analysts remain positive even as the valuation multiple has compressed. Of 82 analysts tracked in the source data, three had hold ratings and one .

Randy Hare, director of equity research at Huntington Bank, argued that the earnings path matters more than the recent valuation reset. “Stocks follow earnings,” he said. “It’s a consistent performer.”

The question is whether the market rewards Nvidia’s earnings or keeps using the stock as a funding source for other AI trades. Eric Clark, chief investment officer at Accuvest Global Advisors, said Nvidia had become “a very crowded trade,” making it vulnerable when investors looked for new exposure elsewhere.

If Nvidia’s profit forecasts hold and investors regain confidence in GPU demand, the company could recover some premium while data-center investment keeps supporting technology capital spending. In that path, the wider semiconductor sector would still broaden, but Nvidia would remain the key profit anchor.

If the rotation into memory and custom chips deepens, Nvidia may keep growing while its stock multiple stays under pressure. That would spread market leadership across more chip suppliers, reduce dependence on one AI winner and make future earnings updates the main test of whether valuation or growth leads the next move.