A staggering $279 billion was wiped off Nvidia’s value following a massive sell-off in the US stock market. Nvidia, a leader in artificial intelligence technology, saw its shares plummet by 9.5%, pulling down the index of 30 leading US semiconductor companies by a sharp 7.8%. This drop came on the back of disappointing manufacturing data and economic uncertainty.
The sell-off came just days after Nvidia revealed its quarterly results, which, despite showing a doubling in sales, failed to meet investor expectations. Tuesday’s trading marked one of the most significant declines since early August, with all three major Wall Street indices seeing substantial losses. The Dow Jones dropped 1.5%, the S&P 500 fell by 2.1%, and the tech-heavy Nasdaq Composite tumbled by 3.3%.
The decline in Nvidia’s stock, along with broader losses in the semiconductor sector, was triggered by ongoing concerns about the health of the US manufacturing industry. Data from the Institute for Supply Management (ISM) showed that manufacturing contracted for the fifth consecutive month. The Purchasing Managers’ Index (PMI) for August registered at 47.2, slightly improving from July’s 46.8 but still signalling contraction (any figure below 50 indicates contraction).
Market Sentiment and Economic Worries
Timothy Fiore from the ISM explained that “demand remains subdued,” as businesses hesitate to invest in capital and inventory due to the Federal Reserve’s current monetary policy and uncertainty surrounding upcoming elections.
In addition to the weak manufacturing report, concerns about the slowing US economy have been growing, particularly since early summer when stock markets took a significant hit. However, market optimism briefly rebounded, with hopes that the Federal Reserve could manage a “soft landing” for the economy by avoiding a recession while taming inflation.
Sam Stovall, a strategist at CFRA Research, noted that the market’s reaction is primarily speculative, as investors anticipate how the Fed will respond. “If there is any kind of economic weakness, investors believe the Fed will respond by lowering interest rates more aggressively,” he said.
Following a prolonged period of high interest rates aimed at tackling inflation, many traders expect the Federal Reserve to lower rates by the end of the month. This potential policy shift is seen as a way to ease pressure on the economy and avert a downturn. Some analysts believe that the Fed may cut rates by as much as a full percentage point this year, signalling deep concerns about a possible recession.
Impact on Global Markets
The fall in US stocks comes ahead of key labour market data expected later this week. Investors are paying close attention to Friday’s non-farm payroll figures, which are seen as a crucial indicator of economic health. A robust jobs report could restore some confidence in the markets, while a disappointing figure could spark renewed fears of an economic slowdown.
Stephen Innes, an analyst at SPI Asset Management, remarked that Friday’s jobs data will serve as a “litmus test” for the market’s direction. He noted that a stronger-than-expected report could ease growth concerns, while weaker results could reignite fears of an impending recession.
September is traditionally a tough month for US stocks, with analysts warning that the market is entering a historically weak period. Sam North, an analyst at investment platform eToro, stated, “September has typically been challenging for US stocks, with the S&P 500 showing negative returns on average.”
