Nvidia sell-off wipes more than $500bn off value of AI chip firm – business live

Nvidia’s shares are on track for further losses when Wall Street opens in five and a half hours time.

Pre-market trading has just opened, and they’re down 2.1% at $115.64, on track for a fourth day of losses, pulling Nvidia deeper into a correction.

That would leave its shares slightly above the short-term support level identified by traders (see earlier post).

Elsewhere in the markets, European aerospace giant Airbus has tumbled 9% this morning after cutting its profit forecasts last night.

Investors are ditching Airbus after it warned of persistent supply chain disruptions and challenges in its space business last night.

Airbus now expects to make around 770 commercial jets this year, down from a previous target of 800, saying:

In commercial aircraft, Airbus is facing persistent specific supply chain issues mainly in engines, aerostructures and cabin equipment.

Airbus is also taking a €900m charge at its Space Systems, after discovering “further commercial and technical” challenges.

It adds:

These are mainly related to updated assumptions on schedules, workload, sourcing, risks and costs over the lifetime of certain telecommunications, navigation and observation programmes.

After a three-day slide, financial traders are wondering how much further Nvidia’s shares may fall.

Bloomberg reports that traders are turning to technical analysis for clues on where the bottom may be.

Yesterday’s 6.7% drop took Nvidia’s share price down to $118, having briefly hit an alltime high of $140 last week.

Buff Dormeier, chief technical analyst at Kingsview Partners, sees short-term support around the $115 level, with the next significant level at $100.

These support levels are calculated by using Fibonacci retracement levels, using stock price data to work out where a stock might have support on the way down, or face resistance on the way up.

Ari Wald, head of technical analysis at Oppenheimer, points out that Nvidia’s longer-term trend remains strong – the stock is still trading well above its 50-day moving average around $101 and 100-day moving average at $92.

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Nvidia, one of the hottest shares on the market this year, has dropped into a correction – leaving traders worrying that the air is coming out of the AI stock boom.

After three days of chunky falls, Nvidia’s stock has now dropped by 13% since – briefly – becoming the world’s largest company a week ago.

Yesterday it tumbled by 6.7% on Wall Street, taking its losses over the last few days to over $500bn(!).

That’s the biggest three-day value loss for any company in history, Bloomberg reports.

Nvidia’s falls pulled the wider market down too, as Jim Reid of Deutsche Bank explained this morning:

Nvidia has been driving markets again over the last 24 hours, as its share price came down another -6.68%, building on its -4.03% decline over the previous week and -16.1% from the intra-day high on Thursday.

In turn, that held down US equity returns more broadly, as the losses for Nvidia pushed the NASDAQ (-1.09%) and the S&P 500 (-0.31%) into negative territory for the day.

Nvidia’s share price falls follow a stellar run – the stock is still up almost 140% in 2024, and has almost tripled over the last 12 months.

The rally had been driven by excitement about artificial intelligence systems, which are powered by Nvidia’s high-end chips.

But some analysts had been concerned that the AI boom had run too high, and was turning into a bubble.

David Morrison, senior market analyst at Trade Nation, says there are signs of profit taking by investors who bought shares in “Market darling Nvidia” on the way up:

Some profit-taking seems entirely reasonable given NVIDIA’s meteoric rise. The stock was up over 180% this year alone. But if it continues to lose ground, then there’s a danger of contagion, with selling spreading to other big tech names. If that were the case, then the market could be in for a deeper and more protracted pull-back.

Yet there are few indications that investors are even thinking along these lines.

Nvidia has been posting very impressive financial results this year. In the last quarter, revenues surged by 262% year-on-year, with earnings per share up a staggering 629%.

But the enthusiasm for Nvidia’s stock this year had pushed its valuation to levels that implied it would keep beating expectations with stellar revenue and earnings.

Another factor weighing on Nvidia is that CEO Jensen Huang has been selling stock this month, through a trading plan. That has focused attention on whether the stock was somewhat overvaued.

Another point: we’ve approaching the end of the financial quarter – so some investors will be rebalancing portfolios and cashing in profits.

Kyle Rodda, senior financial market analyst at capital.com, explains:

It’s difficult to extrapolate what can be attributed to technical factors and what’s fundamentals in the markets, with price action apparently driven by end-of-month and end-of-quarter positioning.

A sell-down in tech, despite little shift in rates expectations and the outlook for earnings, may signal a trimming by investors of the quarter’s big winners. Nvidia epitomises the dynamic, down 12% in three days and little-to-news.

The agenda

• 1.30pm BST: Chicago Fed National Activity Index for May

• 1.30pm BST: Canadian inflation report for May

• 2pm BST: US house price index for April

• 3pm BST: US consumer confidence report for June