Nvidia (NVDA) experienced a significant drop in its stock price on Monday, falling more than 6% to close at $118.11 per share. This marked the third consecutive day of losses for the chip heavyweight as investors decided to rotate out of the once hottest AI play of the year.

Last week, Nvidia's stock reached an all-time closing high of $135.58, temporarily making the company's market capitalization higher than that of Microsoft (MSFT), taking the crown as the most valuable company. However, the chipmaker has now given back its position, with a market capitalization of around $2.9 trillion, below both Microsoft's and Apple's (AAPL) valuations, which each exceed $3 trillion.

Nvidia played a crucial role in uplifting the S&P 500 (^GSPC) and the Nasdaq (^IXIC) to reach repeated record highs this year, driving the market with its impressive growth. However, Wall Street remains divided on whether the recent sell-off indicates long-term concerns with the stock.

Bank of America analysts, maintaining a Buy rating and a $150 price target, argue that the stock's steep climb has made it vulnerable to profit-taking, although they believe any volatility is likely to be short-lived. On the other hand, Jefferies analysts increased their price target to $150 from $135, supporting Nvidia's dominance and calling the company the "king and kingmaker."

Patrick Moorhead, the founder and CEO of Moor Insights & Strategy, stressed the importance of monitoring downstream profitability for signs of a potential pullback. While Moorhead foresees Nvidia's dominance remaining unchanged over the next six to nine months, he emphasizes the necessity of attention towards the downstream profitability of software companies like Adobe, Salesforce, SAP, and ServiceNow. If these companies and consumers are not willing to pay more for new AI features, the entire growth trajectory could come to a halt, similar to what was witnessed during the internet bust.

The current decline in Nvidia stock reflects a shift in investor sentiment as they re-evaluate the company's future prospects. The market will continue to watch closely for any updates or shifts in the AI landscape that could impact Nvidia's business moving forward.

Correction: In a previous version of this article, Microsoft's and Apple's valuations were mistakenly stated as being in the billions. Both companies have market capitalizations exceeding $3 trillion. We apologize for the error.

Ines Ferre, a senior business reporter at Yahoo Finance, contributed to this article.