Nvidia, the semiconductor giant that has dominated the AI chipmaking landscape, is suddenly facing significant challenges as its shares took a dramatic plunge on Tuesday. The company, which recently achieved the highest market valuation for any public company, saw its stock fall by 9.5%, wiping out a staggering $279 billion in market value. This decline marks the largest single-day loss in market value in the history of the stock market, surpassing even the $240 billion loss by Meta in 2022.
The sharp downturn in Nvidia's stock has raised concerns among investors about the sustainability of the company's sky-high valuations, particularly as global economic conditions show signs of weakening. Despite delivering blockbuster earnings last week, Nvidia's somewhat cautious outlook for the future has dampened the optimism that had driven its stock to record highs earlier this year. The company's shares have now fallen more than 20% since their peak in mid-June, reflecting growing skepticism about the future growth prospects of AI-related technologies.
Nvidia's CEO, Jensen Huang, who is the company's largest individual shareholder, personally lost $10 billion in wealth as a result of Tuesday's decline. This drop underscores the broader challenges facing Nvidia and other tech giants heavily invested in AI. As the U.S. economy begins to show signs of stress, there is increasing concern that companies may scale back their investments in AI, a technology that, while promising, is still considered risky and unproven by many.
The broader market also felt the impact of Nvidia's decline. The Nasdaq Composite Index, which is heavily weighted with technology stocks, fell by more than 3% on Tuesday, while other major U.S. tech companies like Alphabet, Apple, and Microsoft also saw significant declines. In Asia, markets followed suit, with Japan's Nikkei 225 ending Wednesday's session 4.2% lower and other major indexes in the region experiencing similar drops.
Adding to Nvidia's woes is the potential for legal trouble. Reports have surfaced that the U.S. Department of Justice has issued a subpoena to Nvidia as part of an antitrust investigation. While the details of the probe remain unclear, the news has fueled concerns about increased regulatory scrutiny under the Biden administration, which has already taken a hard line against other tech titans like Apple, Google, and Amazon.
Nvidia has defended its market position, with a spokesperson stating that the company "wins on merit, as reflected in our benchmark results and value to customers." However, the possibility of an antitrust probe adds another layer of uncertainty to the company's future, particularly as it navigates a competitive and rapidly evolving industry.
Despite the current challenges, some market analysts remain bullish on Nvidia's long-term prospects. The company's latest AI chips, part of its Blackwell series, have reportedly seen demand that far exceeds supply, indicating strong continued interest in Nvidia's products. Wedbush analyst Dan Ives, a well-known AI enthusiast, suggested that the recent decline in Nvidia's stock could represent a buying opportunity for investors, given the company's pivotal role in the tech landscape.
"Nvidia has changed the tech and global landscape as its GPUs have become the new oil and gold in the IT landscape," Ives wrote in a note to investors. He emphasized that Nvidia's innovations in graphics processing units (GPUs), which power AI technologies, are not only transforming industries but are also delivering immediate financial returns to clients.
