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Nvidia stock price plunged nearly 10% on Tuesday, witnessing the biggest ever single-day decline in market value for a US company, as investors’ optimism about artificial intelligence seem to be weakening.

The AI heavyweight Nvidia shares tumbled 9.5% to $108 apiece on Tuesday and lost $279 billion in market capitalization, Reuters reported. This was the largest ever single-day fall in market value for a US company, indicating that investors are becoming more cautious about emerging AI technology that has fueled much of this year’s stock market gains.

Nvidia shares have fallen 14% in the three sessions since it reported earnings that failed to meet lofty expectations. Nvidia stock price had almost tripled in 2024 at its record high close in July. However, the recent losses in the stock leave it up 118% year to date (YTD).

Nvidia’s record one-session loss in market capitalisation was greater than the $232 billion decline suffered by Facebook-owner Meta Platforms on February 3, 2022, when the social media company issued a dismal forecast, according to LSEG data, Reuters reported.

Nvidia valuations

After Nvidia reported its quarterly earnings last week, the mean analyst estimate for annual net income through January 2025 has climbed to $70.35 billion from about $68 billion ahead of last week’s report.

The increased earnings estimates along with the losses in Nvidia share price, have the chipmaker now trading at 34 times expected earnings, down from over 40 in June and in line with its two-year average, Reuters reported.

A selloff was also witnessed in broader markets and other technology stocks on Tuesday following tepid economic data. The PHLX chip index plummeted 7.75%, its biggest one-day drop since 2020.

The session’s weakness in chip stocks accompanied wide declines on Wall Street, with the Nasdaq dropping 3.3% and the S&P 500 down 2.1%.

In a separate development, Bloomberg News reported on Tuesday that the US Department of Justice has sent a subpoena to Nvidia as it deepens its probe into the company’s antitrust practices.

The antitrust watchdog had previously delivered questionnaires, and has now sent legally binding requests to Nvidia, the report said citing people familiar with the investigation. It added that other companies had also received subpoenas.

Officials are concerned that the chipmaker is making it harder to switch to other suppliers and penalizes buyers that do not exclusively use its artificial intelligence chips, the report said.

“Nvidia wins on merit, as reflected in our benchmark results and value to customers, who can choose whatever solution is best for them,” a spokesperson for the company said.

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The Indian primary market was in a lull for three long years from financial year 2019 to 2021. However, the spate of muted fundraising activity was finally shattered in FY2022, a historic year where fund mobilisation through mainboard Initial Public Offerings (IPOs) reached new highs.

In that fiscal alone, there were at least 50 IPOs that together raised over Rs 1,10,000 crore.

In light of the increased activity in the primary market in India, the Securities and Exchange Board of India (Sebi) undertook a study to understand the behaviour of Indian investors towards IPOs.

An interesting (and perhaps concerning) revelation was that the investing community in India largely views IPOs as short-term opportunities rather than long-term investments.

The study by the markets watchdog pointed to “flipping behaviour,” where a majority of investors sell their shares shortly after listing, driven by the pursuit of quick gains.

Selling trends among NIIs, retail investors

According to Sebi, 54 per cent of IPO shares, excluding those held by anchor investors, were sold within a week of listing.

This rapid exit strategy was most pronounced among Non-Institutional Investors (NIIs), which include High Net-Worth Individuals (HNIs) and corporate entities, who offloaded 63.3 per cent of their allotted shares within the first week.

Retail investors also exhibited a strong tendency to sell quickly, with 42.7 per cent of the shares allotted to them being sold within a week.

Individual investors, on average, sold 50.2 per cent of their allotted shares during the same period, indicating a widespread preference for short-term profits over long-term holding.

The study further analysed investor behavior in relation to market performance, revealing that individual investors sold 67.6 per cent of their shares by value within a week when the returns exceeded 20 per cent. In contrast, only 23.3 per cent of shares were sold when returns were negative. This is a demonstration of the “disposition effect”— a tendency to sell winning assets prematurely while holding on to those that are underperforming.

Banks are swift sellers, too

It’s not just individuals, though. Banks, too, tended to sell quickly to benefit from listing gains of IPOs. They were found to sell 79.8 per cent of their allotted shares within a week.

Mutual funds defied the trends with a more patient approach. These investment vehicles sold only 3.3 per cent of their shares within a week of the listing. 

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Shares of Raymond gained 8.6 per cent to touch an intraday high of Rs 2180.85 on the BSE on Tuesday after the fabric and fashion retailer confirmed the news of the separate demerger and listings of its realty and lifestyle businesses.

“Raymond Limited has demerged its lifestyle business to Raymond Lifestyle Limited (RLL) through a Composite Scheme of Arrangement and as per the said Scheme shares of RLL are expected to be listed soon,” the company’s exchange filing read.

It added that the company’s board of directors has approved the scheme of arrangement for the demerger of its realty business to Raymond Realty Limited (RRL), and the demerged entity will be listed on stock exchanges. A timeline for its listing has not yet been disclosed by the company.

That apart, the demerger of the group’s lifestyle business was completed on June 30, 2024, the company said, while adding that Raymond Lifestyle’s listing is expected to happen in the second quarter of this year.

During the quarter that ended on June 30, 2023, a scheme of demerger for the lifestyle business of Raymond into Raymond Lifestyle was approved by the company’s board.

Once the demerger and listing of the three entities is completed, there will be three listed companies in the Raymond Group, that is Raymond, Raymond Lifestyle and Raymond Realty.

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Capital markets regulator Sebi chairperson Madhabi Puri Buch said that if she participated in a discussion on real estate investment trusts (REITs) at a Confederation of Indian Industry event, it may result in accusations against her. She said, “Today, if I speak anything about REIT, I’m accused of conflict of interest.”

This comes after the Sebi boss faced scrutiny after US-based short seller Hindenburg Research alleged that Madhabi Puri Buch had a conflict of interest with Blackstone as her husband Dhaval Buch was appointed as an advisor to the global asset management company- a major investor in Real Estate Investment Trusts (REITs).

Sebi chair praised REITs as her “favourite products for the future” and urged investors to look “positively” upon the asset class, Hindenburg alleged in its report. It added, “While making those statements, she omitted to mention that Blackstone, who her husband advises, stands to gain significantly from the asset class”.

Sebi refuted Hindenburg’s allegations and said that it has consistently highlighted the role of REITs, SM REITs, InvITs, Municipal Bonds, etc, to advance Indian securities market.

Madhabi Puri Buch and her husband, denied the allegations as well as the couple said in a joint statement, “In the context of allegations made in the Hindenburg Report dated August 10,2024 against us, we would like to state that we strongly deny the baseless allegations and insinuations made in the report. The same is devoid of any truth.”

They added, “Our life and finances are an open book. All disclosures as required have already been furnished to SEBI over the years. We have no hesitation in disclosing any and all financial documents, including those that relate to the period when we were strictly private citizens, to any and every authority that may seek them.”

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Growth in the Indian manufacturing sector slowed to a three-month low in August, as firms saw softer growth in new orders and output. The headline Purchasing Managers Index (PMI) figure released by HSBC on Monday stood at 57.5, down from 58.1 in July.
 A figure above 50 in the index denotes expansion and that below signifies contraction.

However, cost pressures moderated and supported the rise in purchasing activity as the rate of input price inflation softened to the slowest in five months. 

“Indian manufacturers registered softer increases in new business and output during August, albeit with rates of expansion remaining elevated by historical standards. Business confidence retreated, but firms scaled up buying levels in a bid to safeguard against input shortages,” the survey by the private agency noted.

Pranjul Bhandari, chief India economist, HSBC, said the Indian manufacturing sector continued to expand in August, although the pace of expansion moderated slightly. 

“New orders and output also mirrored the headline trend, with some panellists citing fierce competition as a reason for slowdown. Nevertheless, all three indicators remain well above their historical averages,” she added. 

On the output front, though it rose at a historically sharp pace, the rate of expansion moderated to the slowest since January. On the one hand, some panellists indicated that greater sales volumes and investment in technology supported production. 

“On the other hand, a few companies suggested that fierce competition and shifts in consumer preferences negatively impacted output at their units,” the survey noted.

The survey also noted that new export orders likewise increased at the weakest pace since the start of the 2024 calendar year. Yet, one-in-ten firms noted an improvement in international sales, which they associated with stronger demand from Asia, Africa, Europe and the US.

“On a positive note, the rise in input costs slowed sharply. Manufacturers increased their raw material buying activity in order to build safety stocks. In line with input costs, the pace of output price inflation also decelerated, but the deceleration was to a much smaller extent, thereby increasing margins for manufacturers. Business outlook for the year ahead moderated slightly in August, driven by competitive pressures and inflation concerns,” added Bhandari. 

On the job creation front, the survey noted that the labour market softened midway through the second fiscal quarter as a few firms trimmed headcounts. 

The August manufacturing PMI came below the flash estimate of 57.9 for the month, though it marks the manufacturing output rising for the 38th consecutive month since July 2021. 

“Nevertheless, the overall rate of employment growth was solid in the context of historical data,” the survey said.

Eqwires Research Analyst

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