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

In the UK retail sector, supermarket chain Morrisons has reported a pick-up in sales.

Morrisons’ like-for-like sales, excluding fuel, rose 4.1% in the three months from 29 January to 28 April. Total sales (ex-fuel) jumped 3.7% to £3.8bn.

Jo Goff, chief financial officer, says:

“This has been another solid quarter of progress with sales and volume improvements right across the business.

Our debt has now reduced by over a third and we made further progress on our cost savings programme with £78m delivered in the quarter, taking the total since the start of this year to just over £450m, in line with our £700 million three year target.”

Last year, Morrisons made a loss of more than £1bn after a debt-fuelled private equity takeover in 2021.

Updated at 05.24 EDT

Nvidia’s stonking share price rise over the last couple of years was partly driven by fear of missing out, says Russ Mould, investment director at AJ Bell.

This phenomenon can work in reverse too, Mould points out:

“Admittedly, a near-7% decline in Nvidia. [yesterday] might have sounded the alarm bells that we’re seeing a shift in the market. It’s important to remember that stocks don’t always travel in a straight line and there is a herd mentality with big-name companies on the market.

“When everyone was piling into Nvidia, it created a sense of FOMO – fear of missing out – so others followed suit and bid up the shares even further. The same works in reverse, where a bout of selling can be exacerbated by others following the crowd and panicking.

“Quite a few institutional investors have been suggesting in recent months that US markets were looking a bit toppy. When everything is racing ahead it is time to take a hard look at a portfolio and think about what could go wrong as well as what could go right. The higher the big tech stocks rise, the greater the potential fall if markets turn.

Updated at 04.51 EDT

Nvidia’s selloff over the last few days has not, yet, spooked the wider markets.

Derren Nathan, equity research analyst at Hargreaves Lansdown, explains:

“Nvidia has had another stumble slipping further away from the position it held briefly as the world’s most valuable company. But contrary to recent noise, markets are about more than just one stock. After several days of declines, yesterday saw the chipmaker’s stock lose over 6%, shedding some $200bn from its market value. But to put things in context, the shares have still gained 190% on a 12-month view, so it’s no surprise some investors are locking in some profits, including CEO Jensen Huang who is reported to have sold around $95mn of stock in recent days.

But although NVIDIA has sneezed, the wider market hasn’t caught a cold with a mixture of less extreme movements in both directions for the rest of the magnificent 7 [tech giants Apple, Amazon, Microsoft, Alphabet, Tesla and Meta].

Meanwhile, in other sectors US stocks saw gains in energy, financials and utilities: a vote of confidence by investors in the health of the broader economy.

Updated at 04.34 EDT

Airbus’s woes have hit UK aerospace manufacturers.

Rolls-Royce, which makes and maintains jet engines, are down 3.3% in London, while Melrose, which produces engine components, are down 3.7%.

Updated at 04.03 EDT

European chip stocks are feeling a chill from Nvidia.

ASML Holding, the Netherlands firm which makes machines to produce semiconductors, are down 2.7% this morning.

Another Dutch chip equipment maker, BE semiconductor Industries, are down 2.5%.

They had both enjoyed strong gains in the last 12 months.

Updated at 03.48 EDT

The drop in chipmakers such as Nvidia may show that a ‘rotation’ has begun in the US stock markets, with money moving away from the mega cap technology stocks which have been a major driver of gains this year.

Richard Hunter, head of markets at interactive investor, says:

The stellar rise of tech and AI-related stocks in particular inevitably gets to the stage where investors pause for breath and recalculate valuation levels.

Over recent days the more traditional Dow Jones index has been the subject of buying interest at the expense of the more tech exposed S&P500 and Nasdaq indices, as investors seek alternatives such as financials and utilities, and more broadly in value stocks which have been left behind by the tech surge.

After two weaker trading sessions, market darling Nvidia fell a further 6.7% while other chip stocks such as Broadcom and Qualcomm fell between 3% and 6%.

While it is far too early to call an end to the current run, such minor corrections are generally seen as healthy, while the expected downward direction of travel for interest rates provides a comforting backdrop as companies more broadly are comfortable to borrow to grow their businesses.

Updated at 03.36 EDT

The drop in Nvidia’s share price in the last three sessions will be painful for investors who had bought call options in the chipmaker.

Call options give the right (but not the obligation) to buy a stock in future at a fixed price.

There had been booming interest in call options in Nvidia, which paid out if its stock kept rising – a profitable trade, until the last few trading sessions.

The biggest profits were to be made in buying ‘out of the money’ Nvidia call options, which would only pay off it its stock climbed sharply higher.

Arguably those call options helped to drive up stocks too, as traders who had written the option could protect themselves by buying the underlying share, just in case they rose above the ‘strike price’ (when the option is then ‘in the money’)

Updated at 03.33 EDT

It’s important to remember that Nvidia is an extremely volatile stock.

Kathleen Brooks, research director at XTB, explains:

The chart below shows Nvidia 1-month call option volatility and the Vix (green line). The calm Vix index hides the fact that the second-best performer on the index is extremely volatile. As we have said before, Nvidia does experience periods of extreme volatility, both to the upside and to the downside. If you own this stock, you need to make peace with that.

But the other issue is that Nvidia’s stock was looking a little pricy.

Brooks writes:

Not even the stock split earlier this month has dampened down Nvidia’s stock price volatility. Analysts have upgraded their forecasts for their Q2 earnings in the last 4 weeks, however, with a 12-month forward P/E ratio of 42, higher than the average for the S&P 500 of 25.6, there is no denying that Nvidia is starting to look a bit rich.

While we don’t deny that Nvidia is delivering on the earnings front: it is expected to deliver $28bn of revenue in Q3, and operating profits of $18.5bn, investors must pay up for these earnings. Thus, there is less room for Nvidia to slip up when it delivers its earnings reports, which may worry some investors. Tech is a multiyear theme, especially Artificial Intelligence, thus we do not expect Nvidia’s stock price to fall off a cliff, but a pullback is to be expected. Added to this, it is normal for investors to pause and consider if a stock is looking overvalued, even a stock like Nvidia.

Updated at 03.03 EDT