Down 13% in the past three trading days, the stock of microchip and semiconductor designer Nvidia (NVDA) has officially fallen into correction territory.
A stock is considered to be in a correction if it declines 10% from recent highs.
In Nvidia’s case, its share price has dropped 12.9% in the span of three trading sessions, losing $430 billion U.S. in market value as a result.
The selloff comes after Nvidia stock split on a 10-for-1 basis June 10 and then rose to an all-time high of $140.76 U.S. per share on June 18.
Nvidia was, briefly, the world’s most valuable publicly traded company with a more than $3 trillion U.S. market capitalization.
The company’s market cap now stands at $2.91 trillion U.S., putting it back behind Microsoft
(MSFT) and Apple (AAPL).
Media are calling the pullback a rotation out of high-flying semiconductor stocks, with some commentators warning that a bubble might be bursting.
However, analysts seem to agree that the decline is due to profit taking and option contract expirations as we approach the end of the second quarter on June 30.
Nvidia is seeing an unusually large number of call options expiring right now, which are bets traders made in recent weeks and months that the share price will rise.
Analysts on Wall Street are issuing notes to clients saying that Nvidia stock is likely to continue rising this year following the current volatility.
One such note from Jeffries (JEF) saw their analysts raise the target price on Nvidia stock to $150 U.S. from $135 U.S. while maintaining a “buy” rating on the shares.
Despite the current decline, Nvidia’s stock remains up 145% this year compared to a 15% increase in the benchmark S&P 500 index.
Nvidia’s stock is currently trading at $118.11 U.S. per share.
