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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2:19
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.
Image: Nvidia CEO Jensen Huang is among directors to have recently sold shares
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.
If you ever fly to Washington DC, look out of the window as you land at Dulles Airport – and you might snatch a glimpse of the single biggest story in economics right now.
There below you, you will see scattered around the fields and woods of the local area a set of vast warehouses that might to the untrained eye look like supermarkets or distribution centres. But no: these are in fact data centres – the biggest concentration of data centres anywhere in the world.
For this area surrounding Dulles Airport has more of these buildings, housing computer servers that do the calculations to train and run artificial intelligence (AI), than anywhere else. And since AI accounts for the vast majority of economic growth in the US so far this year, that makes this place an enormous deal.
Down at ground level you can see the hallmarks as you drive around what is known as “data centre alley”. There are enormous power lines everywhere – a reminder that running these plants is an incredibly energy-intensive task.
This tiny area alone, Loudoun County, consumes roughly 4.9 gigawatts of power – more than the entire consumption of Denmark. That number has already tripled in the past six years, and is due to be catapulted ever higher in the coming years.
Inside ‘data centre alley’
We know as much because we have gained rare access into the heart of “data centre alley”, into two sites run by Digital Realty, one of the biggest datacentre companies in the world. It runs servers that power nearly all the major AI and cloud services in the world. If you send a request to one of those models or search engines there’s a good chance you’ve unknowingly used their machines yourself.
Image: Inside a site run by Digital Realty
Their Digital Dulles site, under construction right now, is due to consume up to a gigawatt in power all told, with six substations to help provide that power. Indeed, it consumes about the same amount of power as a large nuclear power plant.
Walking through the site, a series of large warehouses, some already equipped with rows and rows of backup generators, there to ensure the silicon chips whirring away inside never lose power, is a striking experience – a reminder of the physical underpinnings of the AI age. For all that this technology feels weightless, it has enormous physical demands. It entails the construction of these massive concrete buildings, each of which needs enormous amounts of power and water to keep the servers cool.
We were given access inside one of the company’s existing server centres – behind multiple security cordons into rooms only accessible with fingerprint identification. And there we saw the infrastructure necessary to keep those AI chips running. We saw an Nvidia DGX H100 running away, in a server rack capable of sucking in more power than a small village. We saw the cooling pipes running in and out of the building, as well as the ones which feed coolant into the GPUs (graphic processing units) themselves.
Such things underline that to the extent that AI has brainpower, it is provided not out of thin air, but via very physical amenities and infrastructure. And the availability of that infrastructure is one of the main limiting factors for this economic boom in the coming years.
According to economist Jason Furman, once you subtract AI and related technologies, the US economy barely grew at all in the first half of this year. So much is riding on this. But there are some who question whether the US is going to be able to construct power plants quickly enough to fuel this boom.
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For years, American power consumption remained more or less flat. That has changed rapidly in the past couple of years. Now, AI companies have made grand promises about future computing power, but that depends on being able to plug those chips into the grid.
Last week the International Monetary Fund’s chief economist, Pierre-Olivier Gourinchas, warned AI could indeed be a financial bubble.
He said: “There are echoes in the current tech investment surge of the dot-com boom of the late 1990s. It was the internet then… it is AI now. We’re seeing surging valuations, booming investment and strong consumption on the back of solid capital gains. The risk is that with stronger investment and consumption, a tighter monetary policy will be needed to contain price pressures. This is what happened in the late 1990s.”
‘The terrifying thing is…’
For those inside the AI world, this also feels like uncharted territory.
Helen Toner, executive director of Georgetown’s Center for Security and Emerging Technology, and formerly on the OpenAI board, said: “The terrifying thing is: no one knows how much further AI is going to go, and no one really knows how much economic growth is going to come out of it.
“The trends have certainly been that the AI systems we are developing get more and more sophisticated over time, and I don’t see signs of that stopping. I think they’ll keep getting more advanced. But the question of how much productivity growth will that create? How will that compare to the absolutely gobsmacking investments that are being made today?”
Whether it’s a new industrial revolution or a bubble – or both – there’s no denying AI is a massive economic story with massive implications.
For energy. For materials. For jobs. We just don’t know how massive yet.
Nicholas Rossi, an American man who faked his death and fled to Scotland to escape rape charges, has been jailed for at least five years.
The sentence handed down to the 38-year-old is the first of two he faces after being convicted separately in August and September of raping two women in 2008.
Utah has “indeterminate sentencing” – meaning jail terms handed down are in a range of years rather than a fixed number, with release dates set by the state’s parole board.
Image: Nicholas Rossi appearing in court in August. Pic: AP
During August’s three-day trial, Rossi’s accuser and her parents took the stand – with the victim telling the court that he left a “trail of fear, pain, and destruction” behind him.
“This is not a plea for vengeance. This is a plea for safety and accountability, for recognition of the damage that will never fully heal,” she said.
Brandon Simmons, a prosecutor in the case, alleged Rossi “uses rape to control women” and posed a risk to community safety.
Rossi – whose legal name is Nicholas Alahverdian – maintained his innocence during the sentencing hearing. In a soft, raspy voice, he said: “I am not guilty of this. These women are lying.”
He was first identified in 2018 after a decade-old DNA rape kit was examined.
How Rossi was caught
But in February 2020 – months after he was charged in one of the cases – an online obituary claimed he had died of non-Hodgkin lymphoma.
Rossi was arrested in Scotland the following year while being treated for COVID, after hospital staff recognised his distinctive tattoos – including the crest of a university he never attended.
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Jan 2024: Extradited man denies identity to US court
One of his victims had been recovering from a traumatic brain injury when she responded to a personal advert that Rossi had posted on Craigslist.
They began dating and were engaged within a couple of weeks – and according to her testimony, Rossi had asked her to pay for dates and car repairs, lend him money, and take on debt for their rings.
She told the court that Rossi raped her in his bedroom one night after she drove him home – and went to police years later after discovering that another woman in Utah had come forward with accusations.
Rossi is due to be sentenced for the second conviction in November.
Donald Trump has said he doesn’t think Ukraine can win the war against Russia – as reports emerge of a less-than-harmonious meeting between the US president and Volodymyr Zelenskyy .
Asked about the conflict by a journalist during a visit to the White House by Australian Prime Minister Anthony Albanese, the Mr Trump responded bluntly: “I don’t think they will,” before adding: “They could still win it, I never said they would win it… War is a very strange thing, a lot of bad things happen.”
It is a marked change from his comments a few weeks ago at a UN gathering in New York where he said Ukraine could retake “all of its territory”.
And it comes after the Financial Times claimed the behind-the-scenes of Mr Trump and President Zelenskyy’s meeting in Washington on Friday had descended into a “shouting match”.
According to the paper, the US president repeatedly told his Ukrainian counterpart to accept Vladimir Putin‘s terms for ending the war – warning him that the Russian leader would “destroy” Ukraine if it did not agree.
Mr Zelenskyy later attempted to pour water over the suggestions, saying their meeting was “positive” and that Ukraine was preparing a contract to buy 25 Patriot air defence systems as a result of their talks.
However, Mr Zelenskyy said he did not secure the Tomahawk missiles he had wanted for Ukraine. The long-range missiles would have been a major boost for Kyiv.
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“In my opinion, he does not want an escalation with the Russians until he meets with them,” Mr Zelenskyy said.
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Meanwhile, Hungary’s foreign minister Peter Szijarto has announced he will visit Washington on Tuesday. It follows claims from Mr Trump that he would meet with Russian President Vladimir Putin in Budapest soon.
Image: Will the pair meet again soon? File pic: Reuters
And on Monday, US secretary of state Marco Rubio had a phone call with Russia’s foreign minister Sergei Lavrov.
According to the state department, Mr Rubio and Mr Lavrov spoke about possible concrete steps to implement understandings reached during the call between Mr Trump and Mr Putin last week.
Mr Rubio had, a statement said, also “emphasised the importance of upcoming engagements as an opportunity for Moscow and Washington to collaborate on advancing a durable resolution of the Russia-Ukraine war, in line with President Trump’s vision”.
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Also on Monday, French president Emmanuel Macron announced there will be a meeting of the coalition of the willing in London on Friday which Mr Zelenskyy will attend.
The coalition – co-chaired by Sir Keir Starmer, Mr Macron and Germany’s Chancellor Friedrich Merz – has the aim of bringing countries together to protect a peace deal in Ukraine.