Nvidia share slide erases $500bn in market value

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Nvidia has lost $500bn in market value since briefly becoming the world’s most valuable company last week, as its shares fell 5 per cent on Monday.

Nvidia, whose gains alone are responsible for roughly one-third of the increase in the S&P 500 in 2024, fell 5.9 per cent in late-morning trade in New York to $118.89, down 15.1 per cent from its intraday high of $140.76 hit last Thursday.

Nvidia’s market value on Monday fell to $2.96tn, down by around $500bn 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.

Concerns about Nvidia’s grip on the broader index — it has climbed 140 per cent so far in 2024 — have intensified in recent weeks, with some analysts having warned that 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 around 80 per cent of its value in the subsequent year as the bubble burst and telecoms groups slashed their spending on broadband infrastructure.

The reversal for Nvidia has weighed on the broader chipmaking sector, with the PHLX Semiconductor Index down 6 per cent since Thursday. The tech-dominated Nasdaq Composite stood 0.3 per cent lower in midday trade in New York.

But the broader stock market shrugged off Nvidia’s decline, with the blue-chip S&P 500 gaining 0.3 per cent and the small-cap Russell 2000 index, which has massively underperformed large-cap indices in recent months, up 0.8 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.