NVIDIA's fall shakes Wall Street: the entire tech sector under pressure

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The semiconductor giant, long considered an unshakeable pillar of the technology sector, has seen its share price plunge by more than 10% in a few days. This fall directly impacted the main American indices.

The Nasdaq, a gauge of the health of the technology sector, fell nearly 4%. The S&P 500, a broader barometer of the U.S. economy, was not spared, falling 2.5%. Moves that have revived fears of a broader market correction.

Share selloff

But why has NVIDIA, the flagship of artificial intelligence and data centers, suddenly fallen out of favor with investors ?

The trigger for this stock market storm was the share selloff by NVIDIA CEO Jensen Huang.In early September, Jensen Huang sold a package of shares worth $25.6 million. The move immediately set off alarm bells on Wall Street. Investors, always on the lookout for the slightest signal, saw it as a worrying sign. If the captain leaves the ship, should we fear a shipwreck??

However, this sale did not happen by chance. The American economic context has darkened in recent months. The unemployment rate climbed to 3.8% in August, confounding analysts' forecasts of job growth. The disappointing figures have cast a chill over the entire market, prompting investors to reassess their positions.

NVIDIA, whose market capitalization had reached dizzying heights (it went from $1.19 trillion in January to $3.335 trillion in June), suddenly appeared vulnerable. Its share price, which had been soaring to stratospheric levels, suddenly plummeted to $102.83. This correction triggered a series of automatic sell-offs, amplifying the initial fall.

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The shockwave quickly spread to the entire technology sector. Apple, Microsoft, and other giants saw their values ​​melt away. These companies, which represent more than a quarter of the value of the S&P 500, have dragged the index down in their wake.

But technology is not the only cause. Uncertainty hangs over the monetary policy of the American Federal Reserve. Faced with persistent inflation, the Fed could decide to raise interest rates again by the end of the year. A prospect that is making the tech sector, a major consumer of credit to finance its growth, shudder.

An uncertain future, but solid fundamentals

Despite this blow, NVIDIA still has major assets. Its dominant position in AI, data centers and graphics chips remains uncontested. But in the short term, volatility is likely to remain high.

The future of the sector will depend largely on the Fed's decisions. If it manages to control inflation without causing a recession, technology stocks could rebound. If not, the pressure could continue for several months.

This brutal correction is a reminder that even the strongest giants are not immune to market upheavals. It also highlights the growing importance of the technology sector in the global economy: when tech sneezes, the entire stock market catches a cold.

• NVIDIA shares fall more than 10% in September 2024, dragging the Nasdaq and S&P 500 down in its wake.
• The correction is due to the sale of shares by CEO Jensen Huang as well as disappointing economic data in the United States.
• Despite solid fundamentals, the future of the tech sector will largely depend on the Fed's monetary policy in the face of persistent inflation.

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