(BFM Bourse) – Nvidia shares closed down 9.53% on Wednesday, wiping out nearly $280 billion in market capitalization. That’s well above the previous record held by Meta in 2022.
A Wall Street favorite for almost two years, Nvidia has been racking up numerous stock market records. The graphics processor specialist is notably the company that experienced the biggest increase in market capitalization in one session, with $277 billion on February 22.
The group founded and led by Jensen Huang added another record to its tally on Tuesday, which one imagines it would have done well without.
Nvidia closed the session down 9.53%, losing a total of $279 billion in market capitalization (about €252.26 billion). To give you an idea, such an amount corresponds to more than the entire value of Hermès on the stock market.
The American group erases from the shelves the previous record that was held by Meta. The parent company of Facebook, Instagram and WhatsApp had lost more than 251 billion dollars in a single session, on February 3, 2022. The company founded by Mark Zuckerberg had then dropped 26% following disappointing results.
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Semiconductors in pain
Returning to Nvidia, the graphics processor maker’s plunge is part of a broader correction in the U.S. market. On Tuesday, the S&P 500 fell 2.1%, its biggest drop since the infamous black session of August 5. The Nasdaq composite was particularly under pressure, falling 3.26%.
The movement has therefore particularly crushed growth stocks, authors of good stock market performances, and a fortiori semiconductors. The Philadelphia Semiconductor Index fell by 7.75%. In addition to Nvidia, AMD dropped 7.8%, Intel 8.8%, Broadcom 6.2% and Qualcomm 6.9%.
The movement is spreading somewhat in Europe, where the Dutch ASML fell by 5.4% this Wednesday morning, the German Infineon lost 2.6% and the Franco-Italian STMicroelectronics dropped 2.2%, showing the biggest drop in the CAC 40.
This climate of risk aversion was triggered by a new disappointing statistic in the United States, namely the ISM manufacturing index for the month of August.
Growth fears and US investigation
“The main catalyst for the sell-off was initially the latest ISM manufacturing index, which revived investor concerns about the US economy running out of steam,” Deutsche Bank added.
“Results were again below expectations, at 47.2 in August (versus 47.5 expected), representing only a modest improvement on the disappointing results in July. In addition, the new orders sub-component fell to its lowest level since May 2023, at 44.6. So there was not much good news to focus on, which helped create a gloomy backdrop ahead of Friday’s all-important US jobs report,” the German bank continued.
Stephen Innes of Spi AM sees the markets’ reaction as “a resurgence of fears about growth”. “As usual, if investors are given a reason to sell near a record level, they seize it,” he comments, recalling in passing that September is historically one of the worst months for the market.
“This historical context may help explain why Tuesday’s move could be a sign of a broader sentiment of diminishing risk, as investors brace for potential volatility,” said Mark Haefele of UBS.
US Justice Investigation
Nvidia doesn’t seem poised to rebound, quite the contrary. The company’s stock is down 2.9% in pre-market trading on Wednesday. This comes as Bloomberg reported that the company is the subject of a subpoena (like other companies) from the U.S. Department of Justice (DOJ).
US authorities are reportedly seeking evidence that the chipmaker violated US antitrust laws by penalizing customers who do not buy its products exclusively. The group, for its part, denies any anti-competitive practices.
The episode comes a week after Nvidia delivered robust quarterly results that beat expectations, but perhaps not as sparkling as its recent releases.
“Nvidia’s results failed to exceed investors’ high expectations, despite overall positive figures and outlook. This is partly due to third-quarter growth slightly below buy-side investors’ expectations,” underlines Edmond de Rothschild AM,
Its stock had fallen by 6.4% following the publication of these accounts. Bank of America nevertheless recommended ignoring “the quarterly noise” and therefore the market reaction, to position itself on the value which offers “unique growth at a reasonable valuation”.
“The markets operate in cycles, with the same questions often arising regularly. There will therefore be other downturns concerning the AI revolution (embodied by Nvidia, its figurehead, Editor’s note), other questions about whether it is a bubble or not. This is normal. On the other hand, these phases could be more brutal on the stock market,” judged Christopher Dembik, investment strategy advisor at Pictet AM.
Julien Marion – ©2024 BFM Bourse
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