Nvidia's P/E falls to 18x as $1 trillion in value evaporates

Nvidia's forward P/E fell below the S&P 500's for the first time since early 2019, as investors rotate out of AI winners into memory and equipment makers.

Nvidia Corp.'s market capitalization has shed roughly $1 trillion since mid-May, pushing its forward price-to-earnings ratio to 18 times — the lowest since before the artificial intelligence boom began and below the S&P 500's 20x multiple.

"The market is repricing the AI trade in real time," said Rachel Kim, semiconductor analyst at Edgen. "Nvidia's dominance in data center GPUs isn't in question, but the valuation premium that investors assigned to that position is compressing rapidly."

The chipmaker's shares have fallen 16% from their May 14 all-time high, erasing about $1 trillion in market value. The sell-off accelerated in late June as the broader semiconductor sector rotated: the iShares Semiconductor ETF (SOXX) dropped nearly 6% on July 2 alone, while memory-focused stocks and chip equipment makers attracted fresh inflows. Nvidia's forward P/E now sits at 18x, below the Nasdaq 100's 23x and the S&P 500's 20x — a compression that mirrors levels last seen in early 2019, before the AI trade took hold.

The rotation signals a potential inflection point for the AI investment narrative that has driven Nvidia's market cap from roughly $360 billion at the start of 2023 to a peak above $5 trillion. With the Philadelphia Stock Exchange Semiconductor Index (SOX) surging 87.8% in the second quarter — its best quarterly performance since the index debuted in 1993 — investors are broadening exposure beyond the AI leader into memory manufacturers, chip equipment suppliers, and foundry beneficiaries.

The valuation compression comes as Nvidia faces a more complex competitive field. While its H100 and next-generation B200 GPUs remain the dominant choice for AI data center workloads, the company's $5 billion investment in Intel at $23.28 per share — completed in December — signaled a strategic bet on foundry diversification that some analysts view as a hedge against single-source reliance on Taiwan Semiconductor Manufacturing Co.

Intel, meanwhile, has been the biggest beneficiary of the rotation narrative. The stock surged roughly 270% in the first half of 2026 before pulling back 9% in a single day on July 1 as chip stocks broadly sold off. The U.S. government's roughly 10% stake in Intel, secured through an $8.9 billion investment last August, and a preliminary agreement to manufacture chips for Apple have reshaped the competitive dynamics of the sector.

Memory and equipment makers draw fresh demand

The rotation has been most pronounced in memory and semiconductor capital equipment. Marvell Technology rose 35.76% in June alone, while Onto Innovation gained 48% and Allegro MicroSystems added 47.72%, according to InvestingPro data. The Roundhill Memory ETF (DRAM) has attracted inflows as investors bet that memory pricing cycles and AI-driven demand for high-bandwidth memory (HBM) will drive the next leg of semiconductor growth.

The shift echoes historical patterns in semiconductor investing, where leadership rotates from design to manufacturing to equipment as each sub-cycle matures. Nvidia's forward P/E compression below the broad market multiple suggests the market is pricing in a normalization of growth expectations — even as the company's data center revenue continues to expand.

For investors, the question is whether Nvidia's current valuation represents a buying opportunity or a structural repricing. The stock's 18x forward P/E implies the market expects earnings growth to decelerate meaningfully from the triple-digit pace of the past two years. Nvidia's next earnings report, expected in late August, will provide the clearest signal on whether data center demand is sustaining or whether the rotation has further to run.

Nvidia shares closed at roughly $139 on July 2, down from their May peak. The Nasdaq 100 fell 1.2% on the same day, while the Dow Jones Industrial Average rose 1.1% to a record close — underscoring the narrowness of the sell-off and the rotation into value-oriented sectors.

This article is for informational purposes only and does not constitute investment advice.