Nvidia share price plunge has one major explanation

Published

1 year ago

June 26, 2024

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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).

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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.

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.

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.

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.

US

Tyler Robinson charged with murder of Charlie Kirk – and prosecutors seek death penalty

Published

10 hours ago

September 16, 2025

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Tyler Robinson charged with murder of Charlie Kirk - and prosecutors seek death penalty

Tyler Robinson has been charged with the murder of right-wing US influencer Charlie Kirk.

The 22-year-old, from Washington, Utah, was charged with aggravated murder, weapon, and obstruction of justice offences ahead of a court appearance later on Tuesday.

Prosecutors said they would seek the death penalty and that Robinson’s DNA was found on the trigger of the alleged murder weapon.

A note was also found under his keyboard which said: “I had the opportunity to take out Charlie Kirk and I’m going to take it,” according to a charging document from prosecutors.

It is also alleged that the suspect ordered his roommate to delete “incriminating texts” about the killing and to stay silent if questioned by police.

When his roommate texted to ask if he was the “one who did it”, Robinson replied: “I am, I’m sorry,” prosecutors allege.

Robinson is said to have written in another text: “I had enough of his hatred. Some hate can’t be negotiated out.”

He also allegedly wrote he had been planning the shooting for just over a week.

Kirk, 31, was killed at one of his rallies at Utah Valley University last Wednesday.

The political activist, a close ally of US President Donald Trump, died after being shot in the neck with a bullet.

County attorney Jeff Gray said “aggravating factors” in the killing included that the “defendant is believed to have targeted Charlie Kirk based on his political expression and did so knowing children were present and would witness the homicide”.

The obstruction of justice charges relate to allegations that Robinson disposed of the weapon used in the killing, along with clothing he is said to have worn at the time.

Robinson has been held without bail since his arrest.

Investigators have spoken to Robinson’s relatives and have carried out a search at his family home, 240 miles (385km) southwest of where the shooting took place.

Mr Gray said Robinson had accused Kirk of “spreading hate” during a conversation with his father. He also allegedly described the university as a “stupid venue” for the influencer to hold an event.

After the shooting, the county attorney said the suspect confessed to his parents after they confronted him, telling them he shot Kirk because “there is too much evil in the guy”.

Robinson’s mother told police that her son had become more political and had “started to lean more to the left” in the past year or so, Mr Gray said.

He added that the 22-year-old had become more “pro-gay and trans-rights oriented”, according to his parents.

His mother said he had started to date his roommate, who was “transitioning genders”, prompting “discussions” with his father who had very different political views.

Robinson allegedly wrote in another message to his roommate that “since Trump got into office [my father] has been pretty diehard Maga”.

US

FBI director Kash Patel shouts at Democrat senators over Charlie Kirk and Jeffrey Epstein during oversight hearing

Published

10 hours ago

September 16, 2025

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FBI director Kash Patel shouts at Democrat senators over Charlie Kirk and Jeffrey Epstein during oversight hearing

The FBI director has shouted at Democratic senators during a hearing, taking questions on the assassination of Charlie Kirk, Jeffrey Epstein and the firing of agents.

Kash Patel was testifying before a Senate Judiciary Committee for the first oversight hearing of his tenure as director of the US federal law enforcement bureau.

During the hearing on Tuesday, Mr Patel defended the FBI’s handling of the investigation into the killing of Mr Kirk, as well as his social media post saying that a suspect had been arrested, before that person was ultimately released.

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“Could I have been more careful in my verbiage and included ‘a’ subject instead of ‘the’ subject? Sure,” he said of the post.

Democratic senator Cory Booker opened his questioning by accusing Patel of lying about firing FBI agents out of retribution for political investigations.

Five FBI agents and top-level executives were known to have been summarily fired last month, according to the Associated Press.

Mr Booker said that the director “pushed out senior FBI agents with decades of knowledge and experience”, and added: “You’ve shifted the agency’s priorities primarily to pursuing Donald Trump’s immigration enforcement agenda.

“I believe you have made our country weaker and less safe.”

Mr Patel responded that “you don’t get to say that America is not safer under this leadership”, and said that Mr Booker’s “rant of false information does not bring this country together”, prompting the Democrat to raise his voice.

The two then shouted at each other before committee chair and Republican senator Chuck Grassley banged his gavel to interrupt them.

“I’ve watched him talk over us, and you’ve never once criticised him for us,” Mr Booker said to the chair as he got up to leave the room. “He has been really disrespectful to senator after senator.”

Mr Patel also clashed with Democratic Senator Adam Schiff, who questioned the FBI and Trump administration’s handling of questions relating to the deceased paedophile financier Epstein.

The director accused him of “the biggest fraud to ever sit in the United States Senate” as they shouted at each other, and said “you are a political buffoon, at best”.

Mr Patel, a former lawyer who has been accused of spreading conspiracy theories, was controversially nominated to be the FBI director by US President Donald Trump last year.

He was narrowly confirmed by the Senate in a 51-49 vote in February. Two Republicans voted against his nomination.

US

In pictures: Memorable moments between the royals and US presidents

Published

13 hours ago

September 16, 2025

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In pictures: Memorable moments between the royals and US presidents

American presidents have travelled to Britain to meet the Royal Family for more than 100 years.

Donald Trump will meet King Charles for the second time when he arrives in Windsor on Wednesday, having been hosted by the late Queen Elizabeth II on his previous state visit during his first term.

For the King, it will be the first time he welcomes a US president as monarch.

Some presidents’ visits have run more smoothly than others. Here, we look back at some of the most memorable.

Woodrow Wilson was the first US president to visit the Royal Family while in office, making the long journey on SS Washington in December 1918 – weeks after the First World War came to an end.

Arriving in London on Boxing Day, thousands of people lined the route to Buckingham Palace, where he appeared on the balcony alongside King George V and Queen Mary after chants of “we want Wilson” from the crowd.

King George VI also made history when he met Franklin D Roosevelt, after becoming the first reigning British monarch to travel to the US in June 1939.

People flocked to greet him and the Queen Mother as they rode through the streets of Washington DC. After state dinner formalities at the White House, they travelled to New York, where they enjoyed a more relaxed hot dog picnic in Hyde Park.

Harry Truman was the first US president to meet Queen Elizabeth – while she was still a princess in 1951.

Seven years after she took the throne, Dwight D Eisenhower met her at Balmoral, where a young Princess Anne and Prince Charles were pictured alongside him, wearing kilts.

John F Kennedy met the then-35-year-old Queen Elizabeth in June 1961, just six months into his presidency.

A state banquet was held at Buckingham Palace, with the glamorous visit dramatised in the Netflix series The Crown.

Just two years later, on 22 November 1963, Kennedy was assassinated in Dallas.

Gerald Ford didn’t visit the UK during his two-and-a-half years in office, but the Queen met him on a visit to the US in July 1976.

The pair danced together at a White House state dinner, but with unfortunate timing, the band played The Lady Is A Tramp just as the Queen took to the floor – a now infamous faux pas.

Jimmy Carter met the late Queen at Buckingham Palace in May 1977.

His more memorable interaction was with the Queen Mother, however, when he abandoned protocol and greeted her with a kiss on the lips.

According to biographer William Shawcross, she later wrote: “I took a sharp step backwards – not quite far enough.”

Among the most memorable meetings of a British monarch and a US president was that of Ronald Reagan and the late Queen.

When he came to Windsor Castle in 1982, the pair were famously pictured riding horses together in the grounds.

He met her a further three times in London throughout the 1980s and she gave him an honorary knighthood when he left the White House in 1989.

George HW Bush, wasted no time in making the Queen’s acquaintance, travelling to the UK in May 1989, just five months after he was sworn in.

There were a few red faces when Her Majesty travelled to the US to visit him a year later.

As she stood up to give a speech on the White House lawn, she was partially obscured behind a cluster of microphones that had been arranged for the much taller Mr Bush. He later reassured reporters that the Queen laughed off the incident.

George W Bush‘s state visit in November 2003 was met with huge protests over the Iraq War. Tens of thousands of people crowded into Trafalgar Square, where an effigy of the president was toppled by demonstrators.

The protests did not appear to affect the ‘special relationship’, however, with the Queen visiting the US to meet Mr Bush in 2007, and him returning to the UK to see her a year later.

Barack Obama first met the Queen on a visit to the UK in 2009 when his wife, First Lady Michelle, made headlines for breaking royal protocol and giving Her Majesty a hug.

The Obamas received the full pomp of an official state visit in May 2011.

They visited a final time during the president’s second term in April 2016, when Marine One landed in the grounds of Windsor Castle and the royal couple walked to greet them.

Donald Trump first met the King while he was still Prince of Wales in December 2019, when his mother hosted a state visit to mark the 75th anniversary of D-Day.

His trip was met with huge protests in London, which memorably featured a giant ‘blimp’ that depicted him as a baby.

Despite being accused of breaching royal protocol on several occasions, he described the Queen as an “incredible woman” in one of his speeches.

When Joe Biden visited Windsor Castle in June 2021 it was the first time the Queen had met a head of state alone – following the death of her husband Prince Philip.

It was also the first state visit of any foreign leader after the coronavirus pandemic saw Her Majesty halt royal duties and quarantine at Windsor as part of ‘HMS Bubble’.