For three years, investors paid a premium for the company building the future. On Thursday, the future became cheaper than toilet paper on Wall Street.
Nvidia Corp. (NVDA) now trades at 15.2 times its expected earnings over the next 12 months, according to Koyfin data.
Kimberly-Clark Corp. (KMB), the maker of Cottonelle and Scott toilet paper, Kleenex tissues and Huggies diapers, trades at 15.5 times.
The world's most important artificial-intelligence chipmaker is now valued more cheaply than a company that sells bathroom tissue.
And it is not alone.
Nvidia Is Cheaper Than Two-Thirds Of Consumer Staples
Of the 33 stocks in the State Street Consumer Staples Select Sector SPDR Fund (NYSE: XLP) with available forecasts, 22 trade at a higher forward multiple than Nvidia.
The median stock in the group trades at 17.1 times forward earnings. The average is 20.6 times.
Procter & Gamble Co. (PG), the company behind Crest toothpaste, Head & Shoulders shampoo and Tide detergent, trades at 23.7 times. Colgate-Palmolive Co. (CL) trades at 24.8 times. Church & Dwight Co. Inc. (CHD), the maker of Arm & Hammer, trades at 27.9 times.
In other words, investors are paying roughly 35% more for a dollar of P&G's future earnings than for a dollar of Nvidia's.
Only 11 staples names are cheaper, most of them low-growth food processors and grocers such as Bunge Global (BG), General Mills (GIS), Kraft Heinz (KHC) and Kroger (KR).
How Nvidia Got Here
Nvidia shares fell 7.7% to $184.68 on Thursday afternoon, wiping out about $370 billion of market value.
The stock was down about 3% for the year and has lost 24% in the past month.
The selling accelerated after Democrats' sweep in Tuesday's midterm elections raised doubts over the pace of data-center expansion, as local resistance to power and water use becomes a political issue.
At the same time, about 600,000 Nvidia H200 chips were sitting in Hong Kong as Beijing withholds import approvals, Reuters reported Thursday.
The pressure is spreading across the sector. The VanEck Semiconductor ETF (NASDAQ: SMH) slid 9.4% on Thursday and is down 28% over the past month.
Meanwhile, defensive money has moved the other way. XLP has gained 12.8% over the past month and 17.7% so far this year, while Kimberly-Clark rose 0.8% on Thursday.
The Earnings Have Not Collapsed. The Price Has.
The forward multiple has fallen for two reasons, and only one of them is bad news.
The first is the share price, which has dropped sharply.
The second is the earnings outlook, which keeps rising. Since forward earnings estimates sit in the denominator, faster expected growth pushes the multiple down even when the stock stands still.
Nvidia reports third-quarter results on Nov. 17. Analysts expect earnings of $2.48 per share, up from $1.30 a year earlier, on revenue of $109.17 billion, nearly double the $57.01 billion last year.
Kimberly-Clark, by contrast, sells products that people buy every week regardless of the economy. That stability is exactly what investors are paying for right now.
As a result, the market is placing a higher value on predictable demand for toilet paper than on Nvidia's doubling revenue.
Wall Street Is Split On What Comes Next
Not everyone sees the selloff ending soon. Tech analyst Dan Ives said semiconductor stocks could fall another 10% to 12% during the current pullback.
Fundstrat's Tom Lee called the AI selloff an "overreaction" and said technology stocks could rally about 20% if hedge funds rotate back into the sector before year-end.
"Tech's trying to make a stand here," CNBC's Jim Cramer said. "It's just not the tech that's led us for the last few years."
Analysts still back Nvidia. The stock carries a Buy consensus rating on MarketDash Analyst Ratings, with an average price target of $341.88 across 30 analysts, implying roughly 85% upside from current levels.
The cheap multiple tells investors how much doubt is priced into Nvidia's next year. It does not tell them whether that doubt is wrong.
That answer arrives on Nov. 17.
