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

Volodymyr Zelenskyy believes ‘Putin is afraid’ that Donald Trump could still supply Ukraine with Tomahawk missiles

Published

7 hours ago

October 18, 2025

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Volodymyr Zelenskyy believes 'Putin is afraid' that Donald Trump could still supply Ukraine with Tomahawk missiles

Volodymyr Zelenskyy has not ruled out the possibility that he can secure long-range Tomahawk missiles from the US, adding that he believes “Putin is afraid” of the consequences.

In an exclusive interview with NBC News’s Meet the Press, Ukraine’s president discussed some of the details of his two-hour meeting with Donald Trump on Friday, including his desire for the weapons after three years of war with Russia.

“It’s good that President Trump didn’t say ‘no’, but for today, didn’t say ‘yes’,” he said about the supply of the missiles, as part of a discussion which will air on Sunday.

Ukraine war latest: Zelenskyy proposes ‘drone for Tomahawk’

He admitted the US president was concerned about a potential escalation with Russia, but Mr Zelenskyy told NBC, Sky News’s US partner, that the weapons are a genuine concern for Vladimir Putin.

“I think that Putin [is] afraid that United States will deliver us Tomahawks. And I think that he [is] really afraid that we will use them,” he said.

The weapons have a significantly longer range than any other missiles in Ukraine’s armoury and have the potential to be a game-changer in the war against Russia.

While Mr Trump did not rule out providing the Tomahawk missiles, he appeared cool to the prospect as he looked ahead to a meeting with the Russian president in Hungary in the coming weeks.

‘US doesn’t want escalation’

Following the meeting with Mr Trump, who held a phone call with Mr Putin on Thursday, Mr Zelenskyy told reporters: “We spoke about long-range (missiles) of course. And I do not want to make statements about it.”

But he added: “We don’t speak about it because… United States doesn’t want this escalation”.

Later in a post on X, Mr Zelenskyy said he was counting on President Trump to “bring this war closer to an end”.

“We discussed all key issues – our positions on the battlefield, long-range capabilities and air defence, and, of course, diplomatic prospects,” he said.

“Russia must end the aggression it started and continues to deliberately prolong. We count on the United States’ pressure.”

In a roundtable with journalists following the meeting, Mr Trump confirmed that hitting targets deep inside Russian territory would be an “escalation”.

He also said he was hesitant to tap into the US’ supply of Tomahawks, saying: “I have an obligation also to make sure that we’re completely stocked up as a country, because you never know what’s going to happen in war and peace.

“We’d much rather have them not need Tomahawks. We’d much rather have the war be over to be honest.”

Analysis: Is Trump being ‘played’ by Putin?

Before Donald Trump met with Volodymyr Zelenskyy, he hosted one of his favourite singers, Andrea Bocelli, in the Oval Office.

The Italian tenor serenaded him with the signature track Time To Say Goodbye, a song about hope and new beginnings.

But the next event on his agenda suggested antipathy between Trump and the Ukrainian president are firmly lodged in the past.

On the key issue of whether Vladimir Putin actually wants peace, the pair continue to fundamentally disagree.

Trump repeated several times his belief that Putin is committed to ending the war, which may come as a surprise to the people of eastern Ukraine, being pummeled by an expanded Russian offensive in the past few months.

Trump also spoke about “bad blood on both sides”, again inferring equal blame on Zelenskyy, whose sovereign nation was invaded, and Putin, who is doing the invading.

It’s in Putin’s gift to stop the fighting immediately, but that was glossed over.

US

Donald Trump admits it’s possible he’s being ‘played’ by Vladimir Putin over Ukraine

Published

7 hours ago

October 18, 2025

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Donald Trump admits it's possible he's being 'played' by Vladimir Putin over Ukraine

Before Donald Trump met with Volodymyr Zelenskyy, he hosted one of his favourite singers, Andrea Bocelli, in the Oval Office.

The Italian tenor serenaded him with the signature track Time To Say Goodbye, a song about hope and new beginnings.

But the next event on his agenda suggested antipathy between Trump and the Ukrainian president are firmly lodged in the past.

On the key issue of whether Vladimir Putin actually wants peace, the pair continue to fundamentally disagree.

Trump repeated several times his belief that Putin is committed to ending the war, which may come as a surprise to the people of eastern Ukraine, being pummeled by an expanded Russian offensive in the past few months.

Trump also spoke about “bad blood on both sides”, again inferring equal blame on Zelenskyy, whose sovereign nation was invaded, and Putin, who is doing the invading.

It’s in Putin’s gift to stop the fighting immediately, but that was glossed over.

Zelenskyy, clearly contorted by a need to put the record straight but not anger the famously mercurial man on the other side of the table, fired back that it is the Ukrainians who are committed to a ceasefire, a trilateral meeting and ultimately, an end to this war.

Ukraine war: Zelenskyy proposes ‘drone for Tomahawk’ deal

Relations between Zelenskyy and Trump have, obviously, improved from February when the Ukrainian president was berated and left the White House early.

On that occasion, he was mocked for wearing a T-shirt and so, the next two visits, he has sported an all black suit. He has also learned that Trump responds to flattery and, accordingly, he peppered the president with compliments.

He credited him with “managing the ceasefire in the Middle East”, and said he believes he has a “chance” to do the same in Ukraine.

Trump came into the meeting buoyed by the diplomatic success of the past fortnight in the Middle East, intoxicated by the praise he has received from all sides for brokering the hostage deal. But the war, he said he could solve in 24 hours, is proving a tougher nut to crack, and he’s growing frustrated with everyone involved.

That much could be gleaned from his Truth Social post after the meeting, which implored Putin and Zelenskyy to end the war along its current lines. “Let both claim Victory, let History decide!” he wrote.

It was a marked shift from less than a month ago, when Trump, at that point more angered by Putin, suggested Ukraine could potentially win back all its territory.

As recently as Sunday, he was threatening to send long-range Tomahawk missiles to Ukraine but he made clear after their meeting that he wouldn’t be doing that right now. It’s likely he will wait until at least after his trailed meeting with Putin in Budapest.

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I was in Alaska in August when Trump hosted Putin and laid out the literal and metaphorical red carpet for him.

The US president went in with two aims: to broker a ceasefire and a one-on-one meeting between Putin and Zelenskyy. He left with neither and there is no public sign that Putin has shifted from his maximalist aims in Ukraine.

Even by Trump’s own measurement, the summit was a failure.

Yet he seems determined to take the Russian president at his word, granting him first a phone call ahead of the Zelenskyy visit to Washington DC and now another meeting.

Putin was first successful in getting Trump to hold off on more severe sanctions on Russia, which were crippling economically. Now he has, seemingly, played a role in persuading Trump to hold off on sending Tomahawk missiles to Ukraine.

The US president was asked by a journalist whether it was possible he was being played by Putin. He admitted it was possible but said he usually comes out of these things pretty well. Time will tell.

US

Donald Trump tells disgraced Republican politician George Santos to ‘have a great life’ after ordering prison release

Published

7 hours ago

October 18, 2025

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Donald Trump tells disgraced Republican politician George Santos to 'have a great life' after ordering prison release

Donald Trump has ordered the release of former Republican politician George Santos, who was jailed for more than seven years on fraud and identity theft charges.

“George Santos was somewhat of a ‘rogue,’ but there are many rogues throughout our Country that aren’t forced to serve seven years in prison,” the US president posted on his social media platform.

He said he had “just signed a Commutation, releasing George Santos from prison, IMMEDIATELY.”

“Good luck George, have a great life!” Mr Trump added.

In April, the former New York representative was sentenced to 87 months after prosecutors said Santos preyed upon the campaign finance system and his own political party, donors and family members to line his own pockets.

His fall from grace came less than a year after he was elected to Congress in 2022. It had emerged he fabricated much of his life story, including his business credentials, education, sporting accolades and even his status as a Jewish man.

The decision to commute his sentence followed a public campaign calling for the US president to issue a pardon. A senior White House official said that “many people wrote to him about it”.

While behind bars, Santos published a letter via a local newspaper pleading to Mr Trump directly.

“Sir, I appeal to your sense of justice and humanity – the same qualities that have inspired millions of Americans to believe in you,” he wrote.

“I humbly ask that you consider the unusual pain and hardship of this environment and allow me the opportunity to return to my family, my friends, and my community.”

Santos kept in solitary

Earlier this week, Republican Marjorie Taylor Greene told Sky’s US partner NBC that she had been in contact with the Department of Justice and argued that his punishment was excessively harsh and he was being held in solitary confinement for his safety.

Although before he went to prison, Santos wrote on X, demanding “to be kept in solitary confinement for the entire duration” of his prison sentence.

Mr Trump’s post on Friday included accusations that Santos had been “mistreated” while in prison.

“George has been in solitary confinement for long stretches of time and, by all accounts, has been horribly mistreated,” Mr Trump wrote.

Life story was fabricated

After becoming the first openly gay Republican elected to Congress in 2022, Santos served less than a year before it was revealed that he had fabricated much of his life story.

On the campaign trail, Santos had claimed he was a successful business consultant with a sizable real estate portfolio.

But when his resume came under scrutiny, Santos eventually admitted he had never graduated from Baruch College – or been a standout player on the Manhattan college’s volleyball team, as he had claimed.

He wasn’t even Jewish but raised Catholic. Although Santos insisted he meant he was “Jew-ish” because his mother’s family had a Jewish background.

‘He stole millions’

But some have criticised the US president’s move. Republican Andrew Garbarino, who sits on the House Ethics Committee, said it is “not justice” for Santos to serve only a few months of his seven-year sentence.

Republican Nick LaLota, who represents a swing district in New York, said Santos “didn’t merely lie – he stole millions, defrauded an election”.

Mr Trump has been actively using his power to grant clemency in his second term.

On his first day in office, he pardoned roughly 1,500 criminal defendants charged in the 6 January 2021 attack on the US Capitol and a number of politicians, including Democrats.