September 4, 2024
New Delhi, India
Nvidia Shares
On Tuesday, Nvidia, the U.S.-based AI chip-making giant, saw a staggering 9.5% decline in its share price, losing approximately $279 billion in market capitalization. This marked the largest single-day market cap drop for any company and triggered significant sell-offs across global markets, particularly in Asia.
Key Highlights:
- Intraday Trading Performance:
- Nvidia shares dropped 9.5% to $108 per share.
- The stock experienced further declines of 2% in after-hours trading following a subpoena from the U.S. Department of Justice as part of an antitrust investigation.
- Nvidia’s shares have slumped 14% in the past three sessions since releasing Q2 FY25 earnings, despite exceeding Wall Street expectations.
Impact on Global Markets:
- U.S. Market Reaction:
- The PHLX chip index plummeted by 7.75%, marking its largest intraday drop since 2020.
- Broader U.S. stock indices also fell, with the Dow Jones down 1.5%, the S&P 500 down 2.1%, and the Nasdaq Composite down nearly 3%.
- Other major tech companies, including Apple, Meta, Amazon, Alphabet, and Microsoft, saw their stocks decline.
- Asian Market Sell-Off:
- Japan: Nikkei 225 fell 3.19%, and the Topix index dropped 2.79%.
- South Korea: Kospi index fell 2.71%; Nvidia’s suppliers Samsung Electronics and SK Hynix fell by 2.6% and 6.36%, respectively.
- Taiwan: Taiwan Weighted Index fell by 3.49%; Taiwan Semiconductor Manufacturing Company (TSMC) dropped 3.56%, and Foxconn fell 5%.
- Other Major Declines:
- Tokyo Electronics and Advantest, other Nvidia suppliers, saw drops of 7% and over 8%, respectively.
- SoftBank Group, which holds a stake in Nvidia’s chip designer Arm, fell 6%.
Reasons Behind the Plunge:
- Weak Economic Data:
- The U.S. PMI data for August sparked concerns about the health of the U.S. economy, leading to broader sell-offs.
- Regulatory Scrutiny:
- A Bloomberg report revealed Nvidia had received a subpoena from the U.S. Department of Justice as part of an antitrust investigation, further unsettling investors.
- High Investor Expectations:
- Nvidia’s Q2 results beat estimates, but the company offered a cautious quarterly outlook that disappointed investors, driving the recent sell-off.
- Market Sentiment on AI:
- Growing concerns about the slow returns from significant AI investments have impacted the stock performance of major tech firms, including Microsoft and Alphabet.
Broader Market Implications:
- Investor Sentiment:
- This downturn suggests a shift in investor sentiment regarding AI technology, which has been a significant driver of stock market gains this year.
- Fed Rate Cut Speculation:
- Anticipation of a potential Federal Reserve rate cut in the upcoming September policy meeting has also contributed to market volatility.
Nvidia’s Market Position:
- Despite the recent dip, Nvidia’s stock remains up 118% year-to-date. At its July peak, the stock had almost tripled in 2024.
- The company is a key player in the AI sector, providing chips for leading AI companies like OpenAI.
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