Nvidia shares fell for a second straight session on Tuesday, pulling Wall Street lower as a hotter-than-expected inflation reading revived fears of a bigger interest rate rise from the Federal Reserve.
The chipmaker dropped 5.5 percent to close at $168.80, after a 4.3 percent slide on Monday that erased roughly $190 billion from its market value. The Dow Jones Industrial Average ended 0.3 percent lower at 52,231.89. The S&P 500 slipped 0.3 percent to 7,525.88, and the Nasdaq Composite lost 0.7 percent to finish at 25,065.87.
During the session Nvidia briefly slipped below Microsoft in market value. It ended the day as the world’s second most valuable listed company, behind Apple.
A sell-off driven by governance, not demand
The latest drop has less to do with appetite for artificial intelligence hardware than with questions around chief executive Jensen Huang. On Sunday, Nvidia’s board said independent directors, supported by outside lawyers, would examine reports that Huang had been the target of a foreign intelligence effort. In an open letter, Huang acknowledged he had been unfaithful to his wife. He said he supported the inquiry and would cooperate fully.
Media reports say US officials believe a woman he had a relationship with was gathering information for Chinese intelligence. That is a reported assessment, not a court finding, and no loss of company secrets has been established. President Donald Trump said on Monday that the FBI was looking into the matter. He voiced support for Huang and said he did not think the executive had cause to worry.
Legal pressure adds to the unease
A proposed shareholder class action was filed in federal court in San Jose on Monday. It accuses Nvidia and Huang of misleading investors by failing to disclose the relationship and its possible national security implications. It seeks unspecified damages.
The suit covers investors who bought shares between 9 October, when the relationship was first reported, and 8 November, when the board announced its review. The allegations are unproven. The complaint was filed minutes after markets closed on Monday, so it cannot explain that day’s decline.
Why key-person risk matters
Huang co-founded Nvidia in 1993 and has led it ever since. The company runs with an unusually flat structure in which dozens of executives report directly to him. Analysts quoted in recent coverage mostly do not expect him to step down, but they acknowledge uncertainty over succession. For a company that sits at the centre of the AI trade, that uncertainty is enough to unsettle investors.
Inflation adds to the weight
Nvidia was not the only force at work. Figures from the Bureau of Labor Statistics showed consumer prices rose 0.4 percent in October. Core prices, which strip out food and energy, rose 0.3 percent for a third straight month.
Just before the release, Fed Governor Christopher Waller had said a core reading of that size would lead him to consider a half-point rate rise in December. Traders responded by treating a December increase as close to certain. Treasury yields jumped, with the two-year yield climbing about 19 basis points.
Higher yields tend to weigh most on growth stocks, whose profits are expected further in the future. That helps explain why the technology-heavy Nasdaq fell furthest.
Not every chip stock fell
The picture was not uniformly negative. AMD and Broadcom closed higher, with Broadcom gaining about 4 percent. That suggests investors are separating companies rather than abandoning artificial intelligence altogether.
Lower oil prices also offered some relief. Brent crude traded around $92 a barrel, well below the $112 level seen at the start of November, on hopes of de-escalation between Washington and Tehran.
The market is still recovering from last week’s rout, its worst week in more than a year and a half. That sell-off was driven by worries that election results would slow the build-out of AI data centres.
What investors are watching next
US stock futures pointed higher early Wednesday, led by the Nasdaq after strong results from cloud provider CoreWeave. The next few days offer several tests:
- Applied Materials and Cisco report on Thursday, giving a fresh read on spending on AI infrastructure.
- Producer price data arrives on Friday.
- Nvidia is expected to report quarterly results on 17 November, its first financial update since the controversy began.
- The Federal Reserve meets on 8–9 December.
For now, the market is weighing a rare combination: a governance shock at its largest AI name and a central bank that appears ready to keep tightening. Whether Tuesday’s decline is a pause or the start of a deeper correction may depend on what the board inquiry finds and how Nvidia’s numbers look next week.
This article is for information only and is not investment advice.
