Nvidia Faces Near $300B Loss & Causes Ripple Effect on Stocks
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On Wednesday, global semiconductor and related stocks declined sharply after Nvidia’s significant drop in share price in the U.S. market overnight.
Once one of the biggest headliners of AI stocks, NVIDIA Corp (NVDA:US) saw a perplexing stock price decline of 17.08% in the past five days. During market hours on September 3, 2024, NVDA stock saw a price drop of 9%, leading to a broader sell-off among semiconductor stocks on Wall Street.
Nvidia’s supply chain connections extend to South Korea, affecting companies like memory chip maker SK Hynix and conglomerate Samsung Electronics. Samsung’s shares fell 3.45%, while SK Hynix, which supplies high bandwidth memory chips to Nvidia, saw an 8% drop. In Japan, Tokyo Electron Ltd (TOELY:US) fell 8.5%, and Advantest Corp (ATEYY:US), a semiconductor testing equipment supplier, dropped nearly 8%. SoftBank Group (SFTBY:US), a major shareholder in chip designer Arm, declined 7.7%.
What drove NVDA’s price further down in after-market hours was an announcement that the company had received a subpoena from the Department of Justice. In contrast, a representative from the company told CNBC that they had not received such a notice.
The decline seems to have raised questions about the future profitability of the AI sector, not just Asian stocks.
For the past several quarters, Nvidia has only posted strong earnings results. The company’s last reported earnings - the second quarter of fiscal 2025 - disclosed a record quarterly revenue of $30.0 billion, a 15% increase from the previous quarter and a 122% increase compared to the same period last year. Although still high, it failed to meet analyst’s expectations. According to a Chief Market Strategist at the Carson Group: ‘The bar was just set a tad too high this earnings season.’
In addition, the company’s board approved an additional $50.0 billion for share buybacks, with no expiration date. Before this, the company disclosed a quarterly revenue of $26.0 billion in Q1 Fiscal 2025; this was 262% higher year-on-year.
Despite the price decline, NVDA shares are trading at nearly 120.5% higher year-to-date. A member of the US stock market’s ‘Magnificent 7’, Nvidia is one of the most traded stocks by Congress members, with more than 200 trades in the past three years. Previously, Rep. John James, Rep. Marjorie Taylor Greene, and Rep. Jared Moskowitz were the latest politicians to report their NVDA purchases while Rep. Kathy Manning’s spouse sold as much as $80,000 worth of Nvidia stock on July 2.
Arguably, the most famous case of a Politician trading NVDA was by former House speaker Nancy Pelosi. Her husband, Paul Pelosi, has purchased up to $5 million worth of NVDA in two transactions; one on June 26 and the other exactly a month later.
