Nvidia Corp’s run as the world’s most valuable company didn’t last long.

Shares in the semiconductor giant have fallen 6.7% in the last two days, erasing over US$220 billion in market capitalisation and dragging the company from its place as the world’s top stock. Nvidia’s market cap was about US$3.1 trillion on Friday, lower than Apple Inc at US$3.2 trillion and Microsoft Corp at US$3.3 trillion. 

It was a swift reversal from earlier in the week, when Nvidia rallied to overtake its megacap peers and claim the pole position. Traders said there weren’t any fundamental reasons behind the two-day sell-off at the end of the week, but it does underscore the breakneck pace at which the stock had climbed - almost 200% in the past year alone - and how that ascent now makes it vulnerable to sudden retreats like this one.

“It’s just the usual fluctuations in the stock market which, with such large companies, can wipe or add hundreds of millions or even billions of dollars to their market value,” said Russ Mould, an investment director at AJ Bell.“Nothing has gone wrong at Nvidia.”

Some whipsawing in the short-term was expected by some. In a June 19 note, analysts led by Vivek Arya at Bank of America Corp said that Nvidia’s “steep climb makes it vulnerable to profit taking, but we argue any volatility likely to be short-lived”. The group reiterated its buy rating, US$150 target price (TP) and top pick status for the shares.

Still, bulls see further upside for the stock. Analysts led by Ben Reitzes at Melius Research on Friday boosted their TP for the shares to US$160 from US$125, their fifth raise of the year.

“We continue to believe that Nvidia is in better shape than some software-as-a-service ‘leaders’, who are yet to prove that artificial intelligence (AI) is incremental to the story in our opinion,” Reitzes wrote. “In fact, one could argue that Nvidia should absorb an even larger portion of the enterprise application software market cap as profits transfer to their stack.”

The drop also comes amid broader market retreat, as options expire in a so-called triple-witching session, when contracts fall off the board at the same time that S&P Dow Jones Indices shuffles company weightings and exchange traded funds that track its gauges make similar changes. The move can lead to market turbulence capable of swinging individual holdings.

  - Bloomberg