Nvidia share price plunge has one major explanation

Published

1 year ago

June 26, 2024

admin

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).

Post Office Horizon IT Inquiry – watch live

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

More than a dozen killed as US attacks alleged drug boats in Pacific ‘on Donald Trump’s orders’

Published

12 hours ago

October 28, 2025

admin

More than a dozen killed as US attacks alleged drug boats in Pacific 'on Donald Trump's orders'

Fourteen people have died after the US launched its latest attacks on boats in the eastern Pacific Ocean, which it says were transporting illegal drugs to the country.

It brings the total number of dead from 13 airstrikes to 57, amid increasing tensions between the US and the governments of both Colombia and Venezuela.

A 30-second video posted on X by the US Secretary of War, Pete Hegseth, showed four vessels exploding on Monday on what he said were the orders of US President Donald Trump.

Analysis: Is Trump going to attack Venezuela?

One of the boats appears to be piled high with packages.

Mr Hegseth, who is with Mr Trump on a tour of Asia, said US forces carried out “three lethal kinetic strikes on four vessels operated by Designated Terrorist Organisations (DTO) trafficking narcotics”.

They were identified as drug boats by US intelligence, he said, travelling on “known narco-trafficking routes, and carrying narcotics”.

A total of 14 “male narco-terrorists” onboard were killed, he said, “with one survivor”, who was rescued by Mexican authorities.

Narco-terrorists “have killed more Americans than Al-Qaeda, and they will be treated the same. We will track them, we will network them, and then, we will hunt and kill them,” he added.

The condition and whereabouts of the survivor are not known.

It is the latest in a series of attacks on boats the US says have been carrying drugs in both the Pacific and Caribbean, and comes as Washington continues its military build-up in the latter, deploying guided-missile destroyers, F-35 fighter jets, a nuclear submarine and thousands of troops.

The administration has ordered the USS Gerald Ford aircraft carrier and its supporting strike group to the region, and it is expected to reach the Caribbean in the coming weeks.

Mr Trump has accused Venezuelan President Nicolas Maduro of leading a drug-trafficking organisation, which he denies.

Mr Maduro has repeatedly claimed that the US wants to drive him from power, while some in Venezuela believe the military build-up is aimed at destabilising his government and ultimately forcing regime change in Caracas.

Mr Trump has also authorised the CIA to conduct covert operations in Venezuela.

The Pentagon has provided little information about any of the strikes, including the quantity of drugs the boats allegedly carried and the identities of those killed.

Democrats in Washington have asked whether the attacks comply with the laws of war, while legal experts have asked why the US Coast Guard, the main US maritime law enforcement agency, hasn’t been involved and why other efforts to stop the shipments have not been tried first.

Venezuela’s government says the strikes are illegal, amount to murder, and are acts of aggression.

In August, the Trump administration doubled its reward for information leading to Maduro’s arrest to $50 million (£38m).

US

Warships, the CIA and potential ‘precision attacks’ – the US-Venezuela crisis explained

Published

1 day ago

October 28, 2025

admin

Warships, the CIA and potential 'precision attacks' - the US-Venezuela crisis explained

US warships in the region, the green light for covert operations, and deadly strikes on what the Trump administration claims are “narco terrorists” – could America’s next move be to strike Venezuela?

President Donald Trump has accused President Nicolas Maduro of leading an organised crime gang (without providing evidence) and declined to answer when questioned if the CIA has the authority to assassinate him.

In return, the Venezuelan leader has accused Mr Trump of seeking regime change and of “fabricating a new eternal war” against his country, as he appealed to the American people for peace.

The rhetoric coming out of the White House, coupled with the presence of military ships in the region, has raised questions about a possible armed conflict between the US and Venezuela.

The question in the air is: Will the US actually attack Venezuela?

What are US warships doing?

The docking of the USS Gravely guided missile destroyer in the capital of Trinidad and Tobago – just 25 miles from the coast of Venezuela – is the latest incident to escalate tensions.

Venezuela’s government condemned the arrival and called it a provocation by Trinidad and Tobago and the US.

The USS Gerald R Ford aircraft carrier – the largest warship in the world – is also moving closer to Venezuela.

It comes as the US has acknowledged carrying out at least seven strikes since September on vessels near Venezuela that it claims were transporting drugs, killing at least 32 people.

Venezuela’s government says the strikes are illegal, amount to murder, and are acts of aggression.

Earlier this month, Trump confirmed he has authorised the CIA to carry out covert operations – including lethal operations – in Venezuela.

The CIA has a long history of operations in Latin America, with actions varying widely from direct paramilitary engagement to intelligence gathering and support roles with little to no physical footprint.

What could happen?

To get an idea of what could happen next, Sky News spoke to Dr Carlos Solar, an expert on Latin American security at the RUSI defence thinktank.

He says the level of military strategy the US is applying around Venezuela seems “unproportionate” for the task of tackling drug trafficking.

“A build-up this size can only suggest there’s a strategic military goal,” he added.

Dr Solar says the role of the CIA is “not surprising”, as the US often deploys spying capabilities in countries deemed adversarial.

“With the chances of a military conflict looming, having the most intelligence capable on the ground would be reasonable.”

Asked what could happen next, Dr Solar told Sky News: “One scenario is Trump authorises a round of long-range precision attacks in Venezuela’s territory linked to drug trafficking operations, eventually forcing Maduro to reciprocate later.

“We saw this early in the year when the US attacked Iran’s nuclear facilitates and Tehran returned missiles to US bases in Qatar.

“If the US decides to move more strongly, destroying all critical military targets from the Venezuelan forces, then the US could have Maduro surrender and leave the country immediately.

“This would be the least disruptive without causing greater destabilisation of the country.”

What does Trump say about Venezuela?

Trump said his reasons for the strikes on vessels were the migration of Venezuelans, allegedly including former prisoners, to the US – and drug trafficking.

“I authorised for two reasons really,” he said. “Number one, they have emptied their prisons into the United States of America…they came in through the border. They came in because we had an open border,” he told reporters. “And the other thing are drugs.”

He has accused Venezuela of trafficking huge amounts of cocaine into the US, and alleged Mr Maduro is the leader of the Tren de Aragua gang – a claim most of his own intelligence agencies do not support.

The US leader has not provided evidence for the claim about prisoners, and Sky News chief correspondent Stuart Ramsay pointed out the fentanyl drug that is causing destruction in America is largely manufactured in Mexico, not Venezuela.

“We are looking at land now, because we’ve got the sea very well under control,” Mr Trump added. It is not clear what actions this could entail.

The Pentagon recently disclosed to US Congress that the president has determined the US is engaged in “a non-international armed conflict” with drug cartels.

When asked if the CIA has the authority to execute Maduro, which would be a massive intervention, Trump declined to answer. Instead, he said: “I think Venezuela is feeling heat.”

What does Venezuela’s leader say?

Maduro has been in power since 2013, including re-elections in contests marred by accusations of fraud.

The last decade has seen his country gripped by spiralling hyperinflation and a humanitarian crisis that has seen an estimated eight million Venezuelans flee the country.

As the USS Gerald R Ford aircraft carrier moved closer to Venezuela, Maduro accused the US government of “fabricating a new eternal war” against his country.

“They promised they would never again get involved in a war, and they are fabricating a war that we will avoid,” he said in a national address.

“They are fabricating an extravagant narrative, a vulgar, criminal and totally fake one,” he added, perhaps a reference to Trump’s claim that he is the leader of the Tren de Aragua gang and that his country trafficks cocaine into the US.

“Venezuela is a country that does not produce cocaine leaves.”

Tren de Aragua, which traces its roots to a Venezuelan prison, is not known for having a big role in global drug trafficking but instead for its involvement in contract killings, extortion, and people smuggling.

Venezuela has raised a complaint to the UN Security Council and demanded accountability from the US.

US

Sean ‘Diddy’ Combs scheduled for release from prison in 2028

Published

1 day ago

October 28, 2025

admin

Sean 'Diddy' Combs scheduled for release from prison in 2028

Sean “Diddy” Combs is expected to spend around three years in prison, federal inmate records show.

The 55-year-old music mogul was given a 50-month sentence and a $500,000 fine earlier this month for flying people around the US and abroad for sexual encounters, including his then-girlfriend and male sex workers, in violation of prostitution laws.

According to Sky News’ US partner NBC News, his expected release date is 8 May 2028, according to the Federal Bureau of Prisons.

Prosecutors had pushed for Combs, serving his first criminal conviction, to serve 11 years in prison.

Combs, who has been detained since his arrest in September 2024, was acquitted on more serious charges of racketeering and sex trafficking.

He pleaded not guilty and maintained his innocence.

‘Disgusting, shameful and sick’

Combs, who told a federal district court in New York he admitted his past behaviour was “disgusting, shameful and sick”, is set to appeal the conviction and sentence.

During a seven-week trial, four days of testimony was heard from Cassie, now Cassie Venture Fine, who told the court she was coerced and sometimes blackmailed into sexual encounters with male workers.

Jurors were also shown video clips of Combs dragging and beating Ms Fine in a Los Angeles hotel hallway, following one of those encounters.

She submitted a letter to the judge, ahead of the sentencing, calling Combs a “manipulator” and would fear for her safety if he was immediately released.