Nvidia plunges almost 10% as global markets fall

On Wednesday morning, UK stock markets experienced declines following a drop in Asian and US markets, driven by growing concerns about the global economy’s performance. The latest data revealed that US manufacturing activity remains lackluster, leading investors to shift their attention towards upcoming US jobs figures, due out on Friday.

Among the hardest hit was Nvidia, the American semiconductor giant, whose shares plummeted nearly 10%. This sharp decline dampens the previous enthusiasm surrounding the AI boom, although Nvidia’s stock value remains significantly higher than it was a year ago.

By lunchtime, the FTSE 100 index, which tracks the largest companies on the London Stock Exchange, had fallen by 0.55%. Major European indices also experienced declines: Germany’s DAX dropped 1.41%, France’s CAC 40 fell by nearly 1%, and Spain’s IBEX 35 decreased by 0.51%.

Market analysts are now speculating on the Federal Reserve’s upcoming decision regarding interest rates. The Federal Reserve’s response to economic conditions will be critical when it meets next week.

Julia Lee of FTSE Russell commented that the “Growth concerns are dominating market moves.” In New York on Tuesday, the S&P 500 index closed down by more than 2%, while the technology-focused Nasdaq Composite fell over 3%. Nvidia, which is listed on the Nasdaq, saw its stock drop by 9.5%, erasing $279 billion (£212.9 billion) from its market valuation.

Despite this significant drop, Nvidia’s shares are still valued at nine times their price from November 2022, when the launch of ChatGPT sparked a surge in interest in AI and, consequently, in Nvidia’s chips. However, other major US technology companies, including Alphabet, Apple, and Microsoft, also saw their stock prices fall on Tuesday.

In Asia, the Nikkei 225 index in Japan ended Wednesday’s trading session down 4.2%, while South Korea’s Kospi lost over 3%, and Hong Kong’s Hang Seng fell by 1.1%. Major Asian technology firms, such as TSMC, Samsung Electronics, SK Hynix, and Tokyo Electron, saw significant declines as well. Although the Shanghai and Hong Kong indexes have underperformed over the past year, Japan’s Nikkei has risen by 12% during the same period.

Ms. Lee pointed out that “Concerns around global growth look to be hitting exporting countries in the region particularly hard.” Besides anticipating the Federal Reserve’s interest rate decision, investors are also waiting for the US jobs market report on Friday, which could provide further insights into the direction of the US economy.

Swetha Ramachandran, a fund manager at Artemis Investment Management in London, suggested that Tuesday’s drop in US stocks indicates growing skepticism about the Federal Reserve’s potential to cut interest rates significantly. She described Nvidia’s recent stock drop as “expectations catching up with reality” for the AI-focused company. Ramachandran highlighted that Nvidia’s recent earnings report indicated a natural slowdown in growth, forecasting an 80% growth rate for the third quarter compared to 122% in the second quarter.

Additionally, Nvidia’s decline may also be partly due to reports that the US Department of Justice has issued a subpoena, requiring the company to provide evidence related to antitrust issues. The Department of Justice has declined to comment on this matter.