After the micro-recession in early August, global investors are looking at Nvidia’s stock with fear.
Nvidia could spark another global sell-off barely a month after the previous one when markets had their worst day since the pandemic. On August 5th the Nikkei dropped over 12%, its worst daily performance since the 2008 financial crisis.
Tokyo’s Nikkei is the first major global market to close on a trading day, usually setting off a chain reaction that propagates across the globe.
Today, the Nikkei shed 4.24%, the worst daily performance since early August. The South Korean Kospi dropped 3.15% today.
In Europe, where the trading day just started, the overall STOXX 600 index fell by 1.03% so far today. London’s FTSE 100 lost 0.69% in the early morning.
The sell-off is projected to continue in the United States, where it began yesterday after a federal subpoena hit chipmaker giant Nvidia.
The S&P 500, the NASDAQ Composite, and the Dow Jones shed 2.12%, 3.26%, and 1.51% respectively in the pre-trading session.
September is historically a weak month for global trading, though unusual fears of a recession are tangible. Following August’s “Black Monday”, investors have been on edge for a new and sudden sell-off.
The US Federal Reserve will cut interest rates on September 19th, likely easing fears. However, Nvidia and Big Tech may start a market fire before this deadline.
Nvidia’s sell-off
For almost two years, Nvidia experienced one of the most spectacular rises in stock market history. In 5 years, the stock price jumped 2,288% and rose 106% year-to-date. For a brief period in June, Nvidia was the company with the highest market capitalization in the world, overcoming Microsoft and Apple.
Nvidia’s rise symbolized the artificial intelligence boom, which drove billions of dollars in investments toward Big Tech companies researching AI products. During the summer, however, the quarterly earnings of Microsoft and Alphabet worried investors that AI might not be as profitable as they had hoped.
This realization, combined with the Fed’s decision to postpone rate cuts, caused the market crash in early August.
Yesterday, the US Department of Justice hit Nvidia with a subpoena as part of an ongoing antitrust investigation. The news halted the company’s meteoric growth, with the stock shedding over 10% yesterday.
Nvidia is worsening the already deepened fear in global investors. Its fall may be the match that causes a general fire. A market recession two months before a US recession could have significant political and societal repercussions across the world.
