Nvidia Stock Drops 3.5%. Here’s Why Shares Were Down So Much Today.

Nvidia chips are the favored choice for training artificial-intelligence models. (Joel Saget/AFP via Getty Images)

Nvidia stock fell 3.5% on Tuesday, its biggest drop in months.

The drop came amid a broader market selloff on seemingly little news.

Traders appear to be using the quiet August Tuesday before Jackson Hole to sell this year’s big winners. Nvidia is up 31% this year. The Nasdaq Composite dipped 1.5% on Tuesday, and the Magnificent Seven exchange-traded fund —which includes Nvidia and other hot artificial-intelligence plays—fell 1.6%. Nvidia lost $155 billion in market cap today, according to Dow Jones Market Data.

Other chip makers were hit today, with Advanced Micro Devices off 5.4% and Broadcom down 3.6%. The next major catalyst for Nvidia comes on Aug. 27 when the firm reports earnings.

Today was the worst day for Nvidia stock since April 21, when shares fell 4.5%, according to Dow Jones Market Data. That April drop was also due to a broader market selloff: The Nasdaq fell 2.6% after the president’s comments raised concerns that he would replace the Federal Reserve chairman.

Nothing of that sort was in the news today. And while there are some headlines circling Nvidia, none affected shares in a meaningful way.

Reuters, citing anonymous sources, reported that Nvidia is developing a new AI chip that would be more powerful than the H20 model currently permitted to be sold in China.

“We evaluate a variety of products for our roadmap, so that we can be prepared to compete to the extent that governments allow. Everything we offer is with the full approval of the applicable authorities and designed solely for beneficial commercial use,” an Nvidia spokesperson said in an emailed statement.

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Nvidia has agreed to pay 15% of the revenue generated from AI chip sales in China to the U.S. government, after the Trump administration began approving licenses for processor exports to the Chinese markets.

Separately, Nvidia disclosed in a filing that CEO Jensen Huang sold 150,000 shares in the company for $27.1 million. Huang’s so-called Rule 10b5 trading plan sold shares Aug. 14 and 15 at an average price of $180.80 each. Huang now owns 72.8 million shares in a personal account, according to a form he filed with the Securities and Exchange Commission, and owns several hundred million more shares via trusts and partnerships.

The sale was made through a trading plan the CEO adopted March 20 to sell six million shares. Such trading plans are used to remove the possibility that insiders might benefit from their knowledge of nonpublic information. When preset parameters, such as price, volume, and timing, are met, the plans automatically execute trades.

Write to Adam Clark at adam.clark@barrons.com