Nvidia sell-off wipes $500bn off value of AI chip firm – business live

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Nvidia, one of the hottest shares on the market this year, has dropped into a correction – leaving traders worrying that the air is coming out of the AI stock boom.

After three days of chunky falls, Nvidia’s stock has now dropped by 13% since – briefly – becoming the world’s largest company a week ago.

Yesterday it tumbled by 6.7% on Wall Street, taking its losses over the last few days to over $500bn(!).

That’s the biggest three-day value loss for any company in history, Bloomberg reports.

Nvidia’s falls pulled the wider market down too, as Jim Reid of Deutsche Bank explained this morning:

Nvidia has been driving markets again over the last 24 hours, as its share price came down another -6.68%, building on its -4.03% decline over the previous week and -16.1% from the intra-day high on Thursday.

In turn, that held down US equity returns more broadly, as the losses for Nvidia pushed the NASDAQ (-1.09%) and the S&P 500 (-0.31%) into negative territory for the day.

Nvidia’s share price falls follow a stellar run – the stock is still up almost 140% in 2024, and has almost tripled over the last 12 months.

The rally had been driven by excitement about artificial intelligence systems, which are powered by Nvidia’s high-end chips.

But some analysts had been concerned that the AI boom had run too high, and was turning into a bubble.

David Morrison, senior market analyst at Trade Nation, says there are signs of profit taking by investors who bought shares in “Market darling Nvidia” on the way up:

Some profit-taking seems entirely reasonable given NVIDIA’s meteoric rise. The stock was up over 180% this year alone. But if it continues to lose ground, then there’s a danger of contagion, with selling spreading to other big tech names. If that were the case, then the market could be in for a deeper and more protracted pull-back.

Yet there are few indications that investors are even thinking along these lines.

Nvidia has been posting very impressive financial results this year. In the last quarter, revenues surged by 262% year-on-year, with earnings per share up a staggering 629%.

But the enthusiasm for Nvidia’s stock this year had pushed its valuation to levels that implied it would keep beating expectations with stellar revenue and earnings.

Another factor weighing on Nvidia is that CEO Jensen Huang has been selling stock this month, through a trading plan. That has focused attention on whether the stock was somewhat overvaued.

Another point: we’ve approaching the end of the financial quarter – so some investors will be rebalancing portfolios and cashing in profits.

Kyle Rodda, senior financial market analyst at capital.com, explains:

It’s difficult to extrapolate what can be attributed to technical factors and what’s fundamentals in the markets, with price action apparently driven by end-of-month and end-of-quarter positioning.

A sell-down in tech, despite little shift in rates expectations and the outlook for earnings, may signal a trimming by investors of the quarter’s big winners. Nvidia epitomises the dynamic, down 12% in three days and little-to-news.

The agenda

• 1.30pm BST: Chicago Fed National Activity Index for May

• 1.30pm BST: Canadian inflation report for May

• 2pm BST: US house price index for April

• 3pm BST: US consumer confidence report for June