NVDA fell 3.55% to $190.01 as the chip sector pulled back on valuation concerns. ASML slipped alongside it. The Alpha Score for NVDA is 70, a Moderate rating.
Chip stocks took another hit Thursday as investors rotated out of the sector's highest-flying names on valuation concerns. NVIDIA (NVDA) fell 3.55% to $190.01, while ASML (ASML) slipped alongside it. The move extended a pullback that has erased roughly $1 trillion from the Philadelphia Semiconductor Index since its March peak.
The sell-off has a familiar shape. After a prolonged run that pushed NVIDIA past a $5 trillion market cap and ASML to record highs, the math got harder. Chip stocks trade on future earnings that may take years to materialize, and when sentiment shifts, the multiple compression can be brutal. "The market is repricing the timeline for AI revenue," one New York-based tech hedge fund manager said. "These are great businesses at the wrong price."
Taiwan Semiconductor, Samsung, and SK Hynix – the other giants of the sector – have all given back some of their 2024 gains. In China, CXMT has drawn attention as the latest domestic memory play, but the broader theme is the same: investors are asking how much of the AI buildout is already in the price.
The chip cycle has always been cyclical. Demand for memory and logic chips ebbs and flows with capital spending cycles, and a correction is not unusual after a parabolic move. What is different this time is the AI product cycle, which has opened a new revenue stream for companies like NVIDIA. The question is whether that stream arrives fast enough to justify the current multiples.
For long-term investors, the drawdown may be an opportunity to build positions in companies with strong dividend programs and recurring revenue. For traders, the risk is that the correction deepens if earnings fail to meet elevated expectations. "The easy money was made in the first leg up," the hedge fund manager said. "Now you have to pick your spots."
AlphaScala's proprietary score for NVIDIA stands at 70 out of 100, a "Moderate" rating. The stock page is available here. ASML scores 62, also "Moderate", and its profile is here. Neither score suggests an imminent rebound, but both names remain core holdings in any tech portfolio.
The next catalyst for the sector comes in late May, when NVIDIA reports quarterly earnings. If the company beats estimates and raises guidance, the narrative could shift back to growth. If it disappoints, the soggy chips may stay soggy a while longer.
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