Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Nvidia has shed more than $500bn in market value since briefly becoming the world’s most valuable company last week, as its shares fell almost 7 per cent on Monday.
Nvidia’s market value on Monday fell to $2.91tn, down roughly $550bn from Thursday’s peak. Earlier last week, the company had leapfrogged Microsoft and Apple to become the most valuable publicly listed company in the world, though it has since fallen back to third place.
Nvidia, whose gains alone had been responsible for roughly one-third of the increase in the S&P 500 in 2024, is now down about 16 per cent from its intraday high of $140.76 hit last Thursday.
Concerns about Nvidia’s grip on the broader index — it has climbed almost 140 per cent in 2024 — have intensified in recent weeks, with some analysts having warned a large enough sell-off for the chipmaker could spark a broader market slump.
“If Nvidia corrects pretty hard in the coming months it becomes very difficult for the [S&P 500] to keep rising,” said Barry Bannister, chief equity strategist at Stifel. “And Nvidia will decelerate,” he added, referring to the company’s hitherto strong earnings growth.
Monday’s decline follows disclosures on Friday that the chipmaker’s chief executive and co-founder, Jensen Huang, sold almost $95mn worth of shares in the days shortly before and after it became the world’s most valuable company. The trades were part of a previously scheduled “rule 10b5-1” sale plan, which was set up in March, filings show.
Nvidia declined to comment on the sales.
The stock’s rapid ascent has prompted some sceptical observers to draw comparisons with Cisco, the networking equipment maker that briefly became the world’s most valuable company at the peak of the dotcom boom in March 2000. Cisco lost about 80 per cent of its value in the subsequent year as the bubble burst and telecoms groups slashed their spending on broadband infrastructure.
Nvidia’s reversal has weighed on the broader chipmaking sector, with the PHLX Semiconductor Index down almost 7 per cent over the past three trading sessions. The tech-dominated Nasdaq Composite fell 1.1 per cent on Monday.
Nvidia weighed on the wider stock market on Monday, with the blue-chip S&P 500 closing 0.3 per cent lower despite gains in the majority of sectors. In contrast the small-cap Russell 2000 index, which has underperformed large-cap indices in recent months, rose 0.4 per cent.
Manish Kabra, head of US equity strategy at Société Générale, said Nvidia’s sell-off on Monday constituted “a super-healthy development for the market”.
“Either the market rally broadens out or we form a bubble [in tech stocks] that we don’t yet have,” Kabra said.
Read the full article here
