Nvidia's shares tumbled 5% on Monday, erasing its position as the world's most valuable company as Apple reclaimed the top spot. The selloff pushed Nvidia's forward price-to-earnings ratio to 18.16, its lowest level since April 2015, marking a valuation not seen in over a decade. The drop extended in premarket trading Tuesday, with the stock down a further 0.8% and struggling to stay above the psychologically important $200 level.
The rout was fueled by a double blow: a broader semiconductor selloff triggered by reports that a Chinese company had begun mass-producing key chipmaking equipment, and specific concerns over Nvidia's deepening financial ties to OpenAI. ASML, a critical Dutch supplier, fell 8.5%, while Chinese memory producer CXMT’s strong debut added to fears of stiffer competition. The contagion spread globally, with South Korea’s KOSPI plunging nearly 10% and Japan’s Nikkei dropping 4.4%.
Investor anxiety centered on a Wall Street Journal report that Nvidia is in talks with OpenAI over a $250 billion guarantee to finance a data-center project in Ohio, alongside separate reports of up to $350 billion in financing for OpenAI chip purchases. The financing model raised echoes of dotcom-era circular investment structures, with sellers funding their own customers and introducing new layers of risk.
Morningstar maintained its $280 fair value estimate for Nvidia—a potential 40% upside—arguing that the financing arrangement is consistent with Nvidia’s strategy of expanding the AI ecosystem and that demand for AI computing still outstrips supply. The firm pointed to AMD’s raised server CPU forecast as further evidence of robust demand for agentic AI.
Attention now turns to Big Tech earnings this week from Apple, Meta, Microsoft, and Amazon. Any pullback in their capital expenditure guidance could compound pressure on Nvidia and reverberate across AI-linked assets, including crypto tokens tied to artificial intelligence infrastructure. For the crypto market, the selloff adds to a risk-off sentiment, as traders weigh the sustainability of the AI boom that has buoyed both tech stocks and AI-themed tokens.
