Big Tech

Nvidia's collapse: analysis of causes and the role of Jensen Huang

The stock of the Californian company has plummeted 16% in just a few sessions. The bogeyman is Cisco's precedent

by Biagio Simonetta

25 June 2024

2' min read

Key points

The reasons for the collapse
Cisco's precedent
Chip stocks and the S&P 500

2' min read

Nvidia's leadership on Wall Street lasted very little. The time of a few headlines in the newspapers. Then, since last Thursday (20 June), it has been a bloodbath for the Californian giant's shares. The chip manufacturer - famous for its gaming GPUs and suddenly very rich for its artificial intelligence processors - has lost 16% in three sessions, burning more than half a trillion dollars in market cap.

Thus Nvidia, which for one day was queen of Wall Street by pulling off a historic overtaking of Microsoft and Apple , has 'fallen back' to third place, with a market capitalisation again below $3 trillion.

The reasons for the collapse

But what triggered this collapse?

There has been no change in the Santa Clara company's business plan. It seems rather a matter of correction, after galloping earnings.

There is one detail, however, that may have triggered the stock's collapse: the rumour that the CEO, Jensen Huang, had sold shares for about USD 95 million. Huang's moves would be part of a previously planned Rule 10b5-1 sale plan that was prepared in March, documents show.

I guai europei di Apple e i riscatti su Nvidia

Cisco's precedent

The rapid rise of Nvidia's stock, for the most critical analysts, is something comparable to the boom of Cisco . The network equipment manufacturer, in March 2000, became the most valuable company in the world at the height of the dotcom boom. But that dream was short-lived. Because a year later, when the bubble burst, Cisco lost about 80 per cent of its value and telecommunications groups cut back on broadband infrastructure spending. At the moment, however, the comparisons seem very far-fetched. Because Nvidia's position in chips for generative AI seems absolutely solid.

Chip Stocks and the S&P 500

It has to be said that Nvidia's collapse was a heavy factor for the entire chipmaking sector, with the PHLX Semiconductor Index down almost 7 per cent in the last three trading sessions. All chipmaking stocks have been in retreat, following Nvidia. And the tech-dominated Nasdaq Composite fell 1.1 per cent on Monday.

And there is some apprehension among analysts about the S&P 500 index. Nvidia , whose earnings alone were responsible for about a third of the S&P 500's rise in 2024. And now the alarm is clear: if Nvidia corrects so heavily again, the entire index will suffer.