The drop followed a rally that accelerated after a 10-for-1 stock split that took effect on June 10. Nvidia’s breathtaking rise and its position as the dominant provider of chips to support artificial intelligence applications have made it emblematic of this year’s tech-driven boom in U.S. stocks.

Nvidia’s stock surge

“The bounce today is a normal technical bounce after a 15% drop in three days; you’re not going to go straight down every single day,” said Tom Hayes, chairman at Great Hill Capital in New York. “It’s a great company, it’s a great CEO, and you have insiders selling three-quarters of a billion worth of stock just as retail investors were getting involved with the split,” Hayes added.

Stock of Nvidia, which last week briefly became the world’s most valuable company, has seen a surge of 154% this year. Nvidia has accounted for nearly 30% of the S&P 500’s year-to-date return as of Monday’s close, according to S&P Dow Jones Indices. The index is up 14.6% this year.

Nvidia’s valuation

The recent selloff of stock has helped ease some worries about Nvidia’s valuation, which now stands at about $3.1 trillion from a high of about $3.3 trillion earlier this month.

“It’s a normal correction for a company that has made a run and gotten a lot of publicity,” said Tom Plumb, chief executive and portfolio manager at Plumb Funds, which has Nvidia as one of its largest holdings. “Until there’s a confirmation that the actual business would justify the slowing of the momentum, I don’t think you’ve reached the all-time peak.”

Options market bullish on Nvidia

Bullishness on Nvidia was evident in the options market, though the stock’s recent share price slide appears to have made traders more cautious.

Nvidia call options, typically used to bet on a rising stock price, outnumbered puts by 1.4-to-1 over the last three sessions, Trade Alert data showed. That compared to a call-to-put ratio of 1.6-to-1 for the prior 10 sessions.

At the same time, Nvidia short sellers, who bet on declines in the stock, have gained $4.97 billion in the past three sessions combined, according to data analytics firm Ortex Technologies.

Meanwhile, retail investors have likely been buyers of the stock on the recent dip, said Mario Iachini, senior vice president of Vanda Research, which tracks the behavior of individual investors.

Nvidia’s shareholder meeting

On Wednesday, at the shareholder meeting Nvidia’s CEO, Jensen Huang said that the company’s advantage in AI chips was due to a bet it made more than 10 years ago. Huang’s comments came following a more than 200% surge in the stock over the past year. Wall Street has been enamored by the company’s dominant position in the AI chip market.

Nvidia recently split its stock 10-for-1, passed a $3 trillion valuation and briefly reached the status of most valuable public company.

The stockholders also voted to re-elect 12 existing directors to the company’s board and ratified PwC as the company’s independent registered public accounting firm for fiscal 2025.

Nvidia’s CEO pay package

Nvidia shareholders were pleased with the company’s performance and approved a nonbinding vote on executive compensation called “say on pay.” Nvidia executives are paid in a combination of salary and various kinds of restricted stock units.

Huang the CEO’s pay package was worth about $34 million during the company’s 2024 fiscal year, a 60% increase since 2023, according to the company’s annual filing.

What makes Nvidia stock so attractive?

Nvidia’s stock story is its resilience and the investor sentiment surrounding its volatility. Despite a significant drop from its highs, Nvidia’s bounce back indicates ongoing confidence in its long-term prospects, particularly in AI and tech innovation. The company’s ability to recover after such fluctuations highlights its strategic importance and the broader market’s perception of its leadership in AI chip technology.

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