NVIDIA sees highest m-cap decline of $279 bn as stock falls 10%

U.S. chip design firm NVIDIA, which had recently become the world's most valuable company, saw its share price crashing over 10% in overnight trade on Wall Street, losing nearly $300 billion in its market value. With this, the chipmaker created the record of the largest single-day decline for any company in history, which is bigger than the market cap of 474 listed-companies on the S&P 500, a stock market index that tracks the performance of 500 of the largest companies in the United States.

Finally, NVIDIA Corp stock settled the day’s trade 9.53% lower at $108 per share, wiping out $278.9 billion of its market capitalisation (m-cap). The total m-cap of NVIDIA dropped to $2,633.14 billion, falling behind Microsoft ($3,042.84 billion), and Apple ($3,439.06 billion).  

The sell-off in NVIDIA shares was triggered on Tuesday amid investors’ softening optimism about Artificial Intelligence (AI) in the backdrop of tepid U.S. economic data. The rout in NVIDIA shares also led to broad-based selling in frontline semiconductor stocks, with index heavyweights Intel, AMD, Marvell, Broadcom, and Qualcomm falling up to 8%. The VanEck Semiconductor ETF (SMH) index, which tracks semiconductor stocks, lost over 7%, recording its biggest single-day fall since March 2020.

Despite yesterday’s correction, the company’s share price has surged more than 120% this year, positioning it as one of the best performers on the NASDAQ stock exchange. In the last on year, the blue-chip stock rallied 122%, while it gained 27% in six months and nearly 8% in a month.

Earlier in July this year, NVIDIA registered Wall Street's largest one-day gain of $323 billion, breaking its record $277 billion and Facebook parent Meta’s $196 billion single-day rally in February 2024. The surge in NVIDIA'S shares made it the most valuable company in the U.S. stock market, surpassing heavyweights such as Apple, Microsoft, Amazon, Meta, and Google parent’s Alphabet.  

The rally in the U.S.-based technology company can be attributed to its strong financial performance and growing demand for AI chips. Jensen Huang, founder and CEO of Nvidia, during the March quarter’s earnings call said that the company plans to make new AI chips every year instead of once every two years. The company released its Q1 results on May 22.

In Q1 of FY25, Nvidia reported revenue at $26 billion, up 18% from the previous quarter and up 262% from a year ago. For the quarter, GAAP earnings per diluted share was $5.98, up 21% QoQ and up 629% YoY. Non-GAAP earnings per diluted share stood at $6.12, up 19% from the previous quarter and up 461% from a year ago.

The company also announced a 10-for-1 forward stock split, which will begin trading on a split-adjusted basis at market open on June 10. This means each holder of Nvidia’s common stock will get nine additional shares which will be distributed after market close on Friday, June 7.

The company has also announced an increase in its quarterly cash dividend by 150% from $0.04 per share to $0.10 per share of common stock. The increased dividend is equivalent to $0.01 per share on a post-split basis and will be paid on Friday, June 28, 2024, to all shareholders of record on Tuesday, June 11, 2024, as per the company’s earnings release.

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