Nvidia loses $300 billion in value following board investigation

Nvidia has lost about $300 billion in market value since the company's board announced an investigation on Sunday into the relationship between Huang and a businesswoman named Alice Huang. The investigation, which centres on allegations that Alice Huang is a Chinese spy, has triggered widespread volatility across the global technology sector.

The market reaction has been swift, impacting a broad range of firms connected to the artificial intelligence ecosystem. CoreWeave, an Nvidia-backed neocloud company, saw its shares drop 6 per cent. This decline followed a period of significant movement for the firm, which had surged more than 27 per cent in the previous session after its earnings report helped spark a relief rally in AI-related stocks.

Other companies within the neocloud sector also experienced downward pressure. IREN and Applied Digital were both trading lower, while Nebius fell 10.7 per cent following the release of its third-quarter financial results.

Jun Bei Liu, the lead portfolio manager at Ten Cap, highlighted the significance of the development for the wider industry. Liu noted that Huang serves as the face of Nvidia, a company that has been central to the expansion of artificial intelligence infrastructure. According to Liu, the interconnected nature of the industry, where many new cloud data centre businesses are sponsored through circular financing by Nvidia, means the current turmoil carries meaningful ramifications for the future of the sector.

The ripple effects of the investigation extended to hardware manufacturers and memory chipmakers. Micron Technology shares fell 3.4 per cent, while data storage firms Sandisk and Western Digital eased by 5.1 per cent and 3.2 per cent respectively. Other hardware and server providers also saw declines, with Lumentum, Coherent, and Dell easing between 3.3 per cent and 4.1 per cent.

Broader chip-related companies were similarly affected. Marvell Technology, Intel, Arm Holdings, and Texas Instruments all recorded dips ranging from 1.3 per cent to 2.5 per cent.

In contrast to the general trend, some competitors experienced gains. Shares of AMD and Broadcom, both of which produce AI chips and compete directly with Nvidia, rose 1.7 per cent and 0.8 per cent respectively. Market analysts suggest that investors may be anticipating that the instability at Nvidia could create new opportunities for its rivals to capture market share.

Global stock markets reflected the jitters surrounding the tech sector. Indices in Japan and South Korea closed nearly 0.7 per cent lower, while tech stocks across Europe were down by about 1 per cent.

Financial data indicates that short sellers have benefited from the recent decline in Nvidia's valuation. According to the data analytics firm ORTEX, Nvidia short sellers have made about $3.8 billion in paper profits as of the last close. The firm further estimates that these gains could swell to approximately $6.8 billion if the share price continues to fall to $163.

Valuation metrics for the company have also shifted significantly. Data compiled by LSEG shows that Nvidia is currently trading at about 12 times its 12-month forward earnings estimates. This figure represents the company's lowest valuation level since November 2012.