Investors riding the rapid ascent of the artificial intelligence theme are experiencing a hiccup as shares of Nvidia and other major players slip after a powerful rally.

Nvidia fell 5.7% on Wednesday, the most since 30 January, after the chip maker briefly reached a US$1-trillion market cap earlier this week. The stock’s 250%-plus gain from an October low likely provided an attractive opportunity to pocket some gains, with board member Tench Coxe among people who recently took some money off the table. AI software firm C3.ai fell 9% on disappointing sales forecast, paring its gain for the year to just under 260%.

Wall Street has been obsessed with everything AI this year, with Nvidia’s blowout revenue forecast adding fuel to the frenzied rally. But lofty valuations — Cathie Wood says it’s priced ahead of the curve — are a reason for caution in the still nascent industry.

Cracks appeared in Asia as well, with Taiwan’s TSMC on track for a third straight day of losses while Tokyo-listed Advantest and South Korea’s SK Hynix were down for a second day. Shares of the three Nvidia suppliers have climbed this year amid the AI buying frenzy.

Even after its latest dip, Nvidia is trading at 23 times estimated sales for the current year. That compares with less than 15 times for both Lattice Semiconductor, which has the second highest valuation on the Philadelphia Semiconductor Index, and C3.ai, the small cap whose ticker is “AI”.

The AI faithful are unlikely to be shaken by a few down days, however. Nvidia co-founder and CEO Jensen Huang, whose personal fortune has grown by $20-billion this year, says companies that refuse to take full advantage of the opportunities provided by AI “will perish”.

Buy

Nvidia has 49 buy recommendations, more than all but four stocks on the Nasdaq 100. The stock has seen a proliferation of bullish bets in the options market, with the highest trading volume Wednesday in July $500 and $550 calls, which bet on a 32% and 45% increases in the stock respectively within the next seven weeks.

Read: The trillion-dollar man: who is Nvidia’s Jensen Huang?

“At the current moment, the AI boom is shifting the financial fortunes of one company: Nvidia,” Vital Knowledge’s Adam Crisafulli wrote in a note to clients. “Every company on the planet is talking about how they’re AI plays, but only NVDA is seeing a stair-step shift in its income statement because of the technology.” — Kurt Schussler, with Joanna Ossinger, (c) 2023 Bloomberg LP