Just one week ago, Nvidia became the world’s most valuable company.
The chipmaker – whose shares had risen nine-fold since the end of 2022 – overtook Microsoft as its stock market valuation reached $3.34trn (£2.63bn).
Since then, the shares have fallen by 13%, declining in each of the last three trading sessions.
That has been enough to clip more than $500bn (£394bn) from Nvidia’s stock market valuation reached when, last Thursday, the shares hit an all-time intra-day high of $140.76 (£110.94) each (taking into account the 10-for-one share split completed earlier this month).
To put that into context, Exxon Mobil – the 14th biggest company in the S&P 500 index and itself one of only a dozen companies ever to achieve the status of the world’s most valuable company – has a stock market valuation of $511bn.
So what is going on?
There are a number of factors at play.
The first is profit-taking. Nvidia shares, prior to last Thursday, had enjoyed a fantastic run and had attracted a lot of hot money from so-called “momentum buyers” who see a stock moving higher and jump on board to profit from the ride.
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It was natural for such buyers to lock in profits by selling.
Added to that is that speculative money has moved on. A report published over the weekend in the Wall Street Journal that Meta Platforms, the parent of Facebook, has held talks with Apple about integrating Meta’s generative AI model into the recently unveiled Apple Intelligence system sent shares in both higher as profits from Nvidia’s recent strong run were recycled.
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Last week: Nvidia overtakes Microsoft
That money has not left the market – it has simply been redeployed from Nvidia to other stocks, not least Meta and Apple, but also elsewhere.
That can be shown by the fact that the sell-off in Nvidia, while also dragging down peers such as Broadcom, Taiwan Semiconductor, and Super Micro Computer (a server maker which is a heavy buyer of Nvidia’s chips), did not lead to a wider sell-off.
The Dow Jones, admittedly not as good a barometer of the US stock market as the S&P 500, hit its highest level for a month on Monday even as the S&P 500 and Nasdaq, both of which have a heavier weighting in Nvidia, were falling.
Also contributing to the sell-off was the revelation – via a filing to the main US financial regulator, the Securities & Exchange Commission – that Jensen Huang, Nvidia’s founder and chief executive, has taken advantage of the recent rise in the share price to reduce his holding.
Mr Huang, who founded Nvidia in 1993, sold just under $95m (£74.9m) worth of shares between Thursday 13 June and Friday 21 June. Nor is Mr Huang – who still owns more than 866 million shares in Nvidia worth $102.3bn (£80.3bn) at Monday evening’s closing price – the only director to have been selling recently.
Mark Stevens, a veteran venture capitalist who has been on the Nvidia board since 2008, has offloaded $28m (£22m) worth of shares this month while Tench Coxe, another VC who was one of Mr Huang’s earliest backers and who has been on the board since the start, has sold $119.5m (£94.1m) worth.
Selling by directors is not always a reliable guide to a company’s prospects. Sometimes it reflects personal factors, such as a divorce or estate planning, rather than indicating what a director thinks of a company’s prospects. Rightly or wrongly, though, it is usually taken as a negative signal.
Perhaps the most significant factor in the sell-off, though, is that some investors have been looking at Nvidia through traditional investment yardsticks.
The main one of these is the price/earnings (P/E) ratio. The higher the P/E ratio is, the more expensively a stock is valued.
Last week, after its latest gains, shares of Nvidia were changing hands at 45 times expected earnings.
To put that in context, the forward P/E of the S&P 500 is 22 times and the Nasdaq only slightly more. Put another way, investors were ascribing more than twice the value to Nvidia’s future earnings as they were to those of its peers.
Moreover, as the influential investment magazine Barron’s pointed out at the weekend, Nvidia was being valued at some 20 times its expected sales for the year to the end of January 2026 – a racy valuation, to say the least.
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Stocks with those kinds of valuation have to justify it with spectacular earnings growth.
Yet, as Barron’s columnist Eric Savitz pointed out, Nvidia’s quarter-on-quarter earnings growth has, over the last four quarters, slowed from 88% to 34% to 22% to 18%. Now, quarter-on-quarter earnings growth of 18% is still pretty spectacular. But it does not quite justify a price/earnings multiple that has gone from 25 to 45 over the last year.
Pointing out that from 1976 to 2020, stocks trading at P/E rations of over 15 tended to underperform, Mr Savitz added: “I know what you’re thinking. It’s different this time. This is AI! And sure, maybe AI really is the most important thing to happen in technology since cloud computing, or the internet, or mobile phones, or even the personal computer. But the numbers worry me.
“Nvidia’s market value is now nearly five times the industry estimate for next year’s global chip sales-yes, the total from every company worldwide. Microsoft has seven times the number of employees Nvidia does, and twice the sales. Apple has five times the staff, and triple the sales volume. Nonetheless, this past week, Nvidia’s market cap vaulted past them both.”
Mr Savitz was not the only investment columnist suggesting that, perhaps, Nvidia’s shares might be over-valued.
Some of Monday’s sell-off was also fuelled by the highly influential ‘Heard on the Street’ column in the Wall Street Journal which, at the weekend, invited readers to cast their minds back to the dot-com bubble at the beginning of the century and, in particular, to the gyrations seen at that time in shares of Cisco Systems.
Cisco, the Journal reminded its readers, was favoured along with stocks such as IBM, Lucent and Intel – companies whose hardware were at the forefront of connecting households and businesses to the internet. By the end of 1999, it had become the world’s most valuable company.
The comparison with Cisco has undoubtedly dented sentiment towards Nvidia in some quarters.
Pointing out that today Cisco is now valued at 40% less than it was back then, the Journal highlighted that, at its peak in March 2000, Cisco shares were valued at 131 times forward earnings despite a less impressive financial performance than that recently shown by Nvidia.
Stressing that Nvidia was not is frothily valued as Cisco had been, the column added: “That doesn’t necessarily make Nvidia’s shares safe at their current level, though.
“The stock has seen a big influx of individual investors since the company’s latest financial results last month. Daily retail inflow has averaged nearly $141m since the earnings compared with a daily average of about $39m during the month prior, according to Vanda Research.
“Sell-side analysts are also getting rather exuberant. Several have pushed up their price targets since the stock’s 10 June split. And at least four of those targets are now at $160 and higher, which would put Nvidia’s market capitalization near $4trn at its current share count.
“Nvidia may be the top gun of AI, but investors should be careful not to write checks the stock can’t cash.”
Quite so.
AI is still a nascent technology and it is impossible to know, from here, who may be the greatest winners from it over time.
Just as investors back in 1999, trying to predict who would be the world’s biggest winners from widespread adoption of the internet, could not have known.
At least 40 people have been killed across four states after Hurricane Helene barrelled its way across southeastern US.
Emergency crews are racing to rescue people trapped in flooded homes after Helene struck the coast of Floridaas a highly destructive Category 4 storm.
It generated a massive storm surge, wreaking a trail of destruction extending hundreds of miles north.
Millions are without power in Florida and neighbouring states.
Meanwhile, dozens of people are trapped on the roof of a flooded Tennesseehospital, with a “dangerous rescue operation” under way.
The Unicoi County Hospital is engulfed in “extremely dangerous and rapidly moving water”, according to Tennessee’s Ballad Health.
It said 54 people were relocated to the roof of the Unicoi County Hospital, while seven were in rescue boats.
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“The situation at the hospital is very dangerous and TEMA [The Tennessee Emergency Management Agency] and National Guard resources are engaged in what can only be described as a dangerous rescue operation,” Ballad Health added.
Local official Michael Baker told Sky News people are being moved from the roof “little by little”, describing the flooding as “unprecedented”.
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“We’ve never seen anything like this,” he said.
As of early afternoon, Helene, which has been downgraded to a tropical depression, was packing maximum sustained winds of 35 mph (55 kph) as it slowed over Tennessee and Kentucky, the National Hurricane Center said.
It struck overnight with maximum sustained winds of 140 mph (225 kph) in the rural Big Bend area, the northwestern part of Florida.
The National Hurricane Center said preliminary information shows water levels reached more than 15ft above ground in that region.
US President Joe Biden has approved emergency declaration requests from the governors of several southern states affected by Helene.
Georgia, Florida, Alabama, North Carolina and South Carolina are being supported by emergency response personnel including search and rescue teams, medical support staff and engineering experts.
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Georgia Governor Brian Kemp has said dozens of people are trapped in buildings damaged by the storm, with multiple hospitals in southern Georgia without power.
In western North Carolina, Rutherford County emergency officials have told residents near the Lake Lure Dam to immediately evacuate to higher ground, warning “Dam failure imminent”.
Meanwhile, Florida Governor Ron DeSantis said the damage from Helene in the area appears to be greater than the combined damage of Idalia and Hurricane Debby in August. “It’s demoralizing,” he said.
Many stranded in places like Tampa could only be reached by boat, with officials warning the water could contain live wires, sewage, sharp objects and other debris.
More than four million properties are without power across Florida, Georgia, the Carolinas, Virginia, Kentucky, Tennessee and Ohio, according to the logging website, PowerOutage.
Despite Helene’s power, this hurricane season has been more remarkable for its lack of activity.
At the start of the hurricane season, which runs from 1 June to 30 November, sea surface temperatures were (and remain) off-the-charts warm.
It’s this ocean heat that fuels tropical storms.
This combined with a developing La Nina phenomenon led the US forecasters to predict 2024 would be a major hurricane season. Between 17 and 24 storms were expected, with eight to 13 developing into hurricanes.
Hurricane Beryl grazed the coast of Jamaica in July as a Category 5 hurricane. It was the earliest storm of that size ever recorded and was seen as a harbinger of the prediction. But, so far at least, it’s failed to materialise.
There have been just six hurricanes so far this year – slightly below average. But why?
It seems to be due to what’s happening on the other side of the Atlantic where ocean warming forced the African monsoon further north than usual.
This led to catastrophic flooding in central and west Africa displacing millions, but it also shifted the weather system that usually spawns hurricanes and spins them across the Atlantic.
There’s already abundant evidence our warming oceans and atmosphere are making storms more intense – but predicting where they will occur and how often is never simple – and perhaps getting even harder as our planet gets hotter.
Prior to the hurricane making landfall, officials in Florida begged residents to evacuate. The sheriff’s office in rural Taylor County issued a chilling warning to those who refused to leave.
“Please write your name, birthday, and important information on your arm or leg in a permanent marker so that you can be identified and family notified,” the post on Facebook said.
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Child and dog rescued from floods
Forecasters now expect the storm to continue weakening across Tennessee and Kentucky.
It is feared heavy rain over the Appalachian Mountains could cause mudslides and flash flooding.
Helene has made landfall in northwestern Florida as a Category 4 hurricane, with forecasters warning of a “catastrophic” storm surge.
The National Hurricane Centre in Miami said Helene struck near the mouth of the Aucilla River in the Big Bend area of Florida’s Gulf Coast at around 11.10pm local time.
High winds, possibly in excess of 140mph (225kph), and flash floods are possible, the weather service said.
Florida Governor Ron DeSantis told reporters one person had died while driving on a motorway when a sign fell on to their car.
“When Floridians wake up tomorrow morning, we’re going to be waking up to a state where, very likely, there’s been additional loss of life. And certainly, there’s going to be loss of property,” Mr DeSantis said.
“You’re going to have people that are going to lose their homes because of this storm. So please keep those folks in mind, keep them in your prayers.”
Two other people are reported to have been killed in a possible tornado in neighbouring south Georgia as the storm approached, the Associated Press reported.
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More than one million homes and businesses were already without power shortly after the hurricane made landfall, according to tracking website poweroutage.
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States of emergency have been declared in Florida, Georgia, and the Carolinas, with hurricane and flash flood warnings in place as far away as south-central Georgia.
Officials pleaded with residents in the path of the storm to heed mandatory evacuation orders or face life-threatening conditions.
The surge caused by the hurricane – the wall of seawater pushed on land by hurricane-force winds – could rise as high as 20ft (6.1m) in some spots, as tall as a two-storey house, Michael Brennan, director of the hurricane centre, said in a video briefing.
“A really unsurvivable scenario is going to play out” in the coastal area, Mr Brennan said, with water capable of destroying buildings and carrying cars pushing inland. Millions of people are under the current flood watch.
Forecasters warned the storm surge could be particularly “catastrophic and unsurvivable” in Apalachee Bay.
‘It’s going to cause a lot of damage’
Residents in the city of Tallahassee told Sky’s US partner NBC News that they stocked up on sandbags, food and supplies, before leaving their homes.
The city’s mayor John Dailey urged people to take the evacuation warnings “extremely seriously”, calling Helene “the biggest storm in the history of the city to hit us head-on”.
Speaking to NBC News on Wednesday, Mr Dailey said though they are “very prepared”, he was also “very nervous, and I hope everyone is nervous”.
He added: “This is a big storm. It is going to cause a lot of damage.”
Jared Miller, sheriff of Wakulla County, went further – calling the storm “not a survivable event for those in coastal or low-lying areas”.
The county has issued a mandatory evacuation order, but one resident, Christine Nazworth from Crawfordville, which is located about 25 miles (40km) from Apalachee Bay, said her family would be sheltering in place.
She said: “I’m prayed up. Lord have mercy on us. And everybody else that might be in its path.”
Leslie Powell, from Quincy, a city a similar distance from Tallahassee, told NBC she was leaving her mobile home to go to a shelter with her eight-month-old baby and six-year-old daughter.
She said simply: “I’m scared. I’ve got a lot of trees around my home, so it’s not safe for me and my kids.”
Helene is expected to remain a full-fledged hurricane as it rolls through the Macon, Georgia, area on Friday, forecasters said.
Sir Keir Starmer is to meet with Donald Trump later tonight.
It is believed to be the first meeting between the current UK prime minister and former – and potentially future – US president.
The pair are set to meet overnight UK time, which is the evening in New York, where Sir Keir is currently located while on a visit to the UN.
David Lammy, the Labour foreign secretary, has met Mr Trump‘s vice presidential candidate, JD Vance.
Speaking to journalists, Sir Keir reiterated he wanted to meet both Mr Trump and Kamala Harris ahead of the November vote.
However, meeting the Democrat is hard due to the “usual diary challenges”.
Sir Keir said: “It’ll be really to establish a relationship between the two of us.
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“I’m a great believer in personal relations on the international stage.
“I think it really matters that you know who your counterpart is in any given country, and know them personally, get to know them face to face.
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“So it’s really along those lines. I won’t go into what we’ll actually discuss, obviously, but that’s the purpose of it, as you’d expect, ahead of the election.”
Asked if a Trump presidency would leave Ukraine exposed, Sir Keir said the nature of the “special relationship” between the UK and US “always sits above whoever holds the particular office”.
“The US people will decide who they want as their president, and we will work with whoever is president,” he added.
“I’m not going to speculate on what any particular issues may be on the other side of the election.”
Speaking ahead of the meeting, Mr Trump said he thought Sir Keir was “very nice”.
He said: “I actually think he’s very nice. He ran a great race, he did very well, it’s very early, he’s very popular.”
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Mr Trump went on to praise Reform UK leader Nigel Farage as well, saying: “I think Nigel is great, I’ve known him for a long time.”
“He had a great election too, picked up a lot of seats, more seats than he was allowed to have actually.
“They acknowledged that he won but for some reason you have a strange system over there, you might win them but you don’t get them.”
This appears to be a misunderstanding of how the UK’s first past the post system for elections chooses MPs – Reform won fewer seats compared to its vote share because it came second in many seats.