NVIDIA wipes out $430 billion over two days as Microsoft briefly reclaims second place in global market cap

Author: Yang Chen, Wall Street CN

Nvidia's shares fell for a second consecutive trading day, dropping over 6% at one point on Tuesday, wiping out nearly $430 billion in market value over the two days.

Chart: Intraday price movement of Nvidia (NVDA), closing down 5.47%

Data shows that its market capitalization has evaporated by nearly $2 trillion from its historical peak, with a staggering $1.2 trillion lost in market value over just the past 10 trading days.

Chart: Nvidia's market cap has fallen by approximately $1.7 trillion since October 6

Chart: Trend of Nvidia's market cap change over 10 trading days

Tuesday saw Nvidia's decline significantly outpace other large-cap tech stocks, becoming a key factor dragging down sector performance. Meanwhile, hotter-than-expected CPI data combined with hawkish comments from Federal Reserve officials drove U.S. Treasury yields sharply higher, further dampening risk asset sentiment and intensifying pressure on tech stocks.

Microsoft closed down 2.2%, Alphabet fell approximately 0.4%, Meta was flat, Apple declined about 0.6%, Tesla rose 0.5%, and Amazon gained roughly 1.5%. The S&P 500 index dropped about 0.4%, while the Nasdaq 100 index fell 0.6%.

Notably, the Nasdaq 100 index has cumulatively fallen by approximately 2% since the election, reflecting clear pressure across tech stocks as a whole.

Chart: Performance of major U.S. equity index futures relative to pre-election closing levels

During U.S. trading hours, Microsoft's market cap briefly surpassed Nvidia's, making it the world's second-largest publicly traded company. However, after Anthropic released an office suite, Microsoft's declines widened, causing it to fall back behind Nvidia. Nvidia's current market capitalization has retreated to levels comparable to Apple and Microsoft, significantly narrowing its former commanding lead.

Chart: Market capitalization comparison of top global tech companies and Nvidia's recent pullback magnitude

Shareholders File Class Action Lawsuit, Corporate Governance Risks Continue to Escalate

Amid pressure on its share price, Nvidia faces new legal and corporate governance pressures. A shareholder filed a lawsuit in California on Monday, alleging that Nvidia and CEO Jensen Huang misled investors regarding disclosures and responses to previous related events, seeking compensation for investors who purchased Nvidia stock during a specific period.

The lawsuit claims that the company and Huang failed to adequately disclose related relationships and the potential risks they entailed, leading investors to buy shares without fully understanding the situation.

The plaintiffs also allege that these events could pose significant risks to Nvidia's reputation and business prospects. The lawsuit remains in its early stages, the allegations have not been proven in court, and Nvidia has not yet issued a formal response.

Tuesday brought a continuous stream of negative news surrounding Huang: Nvidia's board announced it would hire an independent law firm to conduct an internal investigation; House Republicans are reportedly considering issuing a subpoena to Nvidia's CEO to request a closed-door briefing; other media reports stated that U.S. Secretary of State Rubio had briefed Trump on Huang's contacts with relevant individuals; meanwhile, reports indicated the FBI is investigating Huang's relationship with said individuals.

Previously, Nvidia's board announced the formation of a committee composed of independent directors and hired external independent legal counsel to investigate related reports concerning Huang.

The board stated there is currently no reason to believe that Nvidia's national security interests or corporate secrets have been compromised, but the investigation will review all available information. Huang expressed support for the investigation and pledged full cooperation.

Uncertainty Surrounding AI Investment Prospects Coupled with Executive Risk Puts Nvidia Under Dual Pressure

Beyond governance concerns triggered by executive events, whether AI infrastructure investments can continue to deliver sufficient returns remains a core issue for the market. As a key supplier in the AI computing power supply chain, Nvidia's stock performance is influenced not only by the company's own operational expectations but also reflects investors' judgments on the broader AI capital expenditure cycle.

Data indicates that AI-related stocks underperformed the broader market as a whole on Tuesday, with emerging clouds (NeoClouds) and optical networking sectors posting the largest declines. Meanwhile, the portion of the S&P 500 index excluding AI-related components barely finished flat, indicating that selling pressure was heavily concentrated within the AI industry chain.

Chart: Goldman Sachs U.S. equity AI sub-sectors and the S&P 500 index excluding AI components trend comparison

The Associated Press noted that Huang has led Nvidia for 33 years, with his personal image highly intertwined with the company's strategy, operational decisions, and market perception. Consequently, the ongoing investigation has prompted investors to pay closer attention to management stability and potential succession issues. Data from prediction market Polymarket shows traders currently assign only about a 16% probability to Huang stepping down before year-end, a pricing some analysts consider too low.

Chart: Polymarket odds on the probability of Huang stepping down before year-end

In terms of market performance, Nvidia's significant underperformance compared to other large-cap tech stocks over two consecutive trading days indicates that investors are reassessing the risks facing the company. Goldman Sachs trader reports indicate that Tuesday's sell-off was more driven by genuine fundamental factors, with both hedge funds and long-term institutional investors acting as net sellers, concentrating their sales in the technology and industrial sectors.

In the short term, the progress of the board's investigation, the aftermath of the lawsuit, and management stability will become key variables influencing the stock price. Meanwhile, the return outlook for AI infrastructure investments will continue to dictate market judgments on Nvidia's long-term valuation.

Additionally, a Wall Street CN article previously noted that Goldman Sachs estimates programmatic trading strategies (CTAs) will sell approximately $31 billion worth of S&P 500 futures over the coming week regardless of market direction, which will impose additional technical downward pressure on tech stocks.