3 Reasons For Nvidia's Historic Share Fall and 1 Reason For Its Future Rise Nvidia experienced a massive USD 279 billion drop in value in a single day
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Tech giant Nvidia is making headlines again, but this time for its falling stock price. Over the past week, the stock lost over USD 16.02 in value, now sitting at USD 102.83. This marks a 13.49 per cent decline compared to its price at the beginning of the week. Although Nvidia saw a more than 650 per cent rise in its share price since 2023, it recently experienced a massive USD 279 billion drop in value in a single day—the largest one-day fall in U.S. stock history. At the time of publishing, the market cap of Nvidia stood at USD 2.522 Trillion.
Nvidia's shares continued to drop after Bloomberg reported that the company received a formal written order from the U.S. Department of Justice as part of an antitrust investigation. But what are the other reasons behind this historic fall?
Fear of Government Hunt
The company has been under regulatory scrutiny since the Justice Department issued a subpoena to investigate potential antitrust practices. Investors fear losing money if the investigation leads to negative outcomes. However, Nvidia claims it hasn't been subpoenaed and that it maintains fair competition. The company said, "Nvidia wins on merit, as reflected in our benchmark results and value to customers, and customers can choose whatever solution is best for them. We have inquired with the U.S. Department of Justice and have not been subpoenaed. Nonetheless, we are happy to answer any questions regulators may have about our business."
Despite this, its heavy investments in other artificial intelligence (AI) companies have worried regulators. "Nvidia's influence extends beyond its own chips, potentially raising questions about preferential treatment for its investees or customers," shared Dan Coatsworth, an investment analyst, with Reuters.
Disappointing Forecasts
Despite its growth, Nvidia's recent quarterly forecast didn't match with analysts' expectations. It is also one of the reasons investors are not happy with the company.
"Those earnings last week were fine; they exceeded expectations. But the magnitude of the beats is shrinking quarter by quarter and that's not lost on investors," Steve Sosnick, market strategist, Interactive Brokers told Reuters.
Additionally, the chip sector has witnessed a decline of 8.2 percent, with the market cap dropping from USD 574.1 billion in 2022 to USD 526.9 billion in 2023.
Investors Are Overwhelmed With AI
According to Stanford's Institute for Human-Centered Artificial Intelligence (HAI), global investment in AI saw a continued decline in 2023. Mergers and acquisitions in AI dropped from USD 117.16 billion in 2022 to USD 80.61 billion in 2023. Private investment also fell, going from USD 103.4 billion to USD 95.99 billion.
These numbers suggest that investors are worried about slow returns on their large AI investments. There's also concern over the unpredictable nature of the AI market. Increased scrutiny on AI is adding to the slowdown in investment.
What's Ahead?
The Jensen Huang-led company believes that the next-generation AI models will need much more computing power—10 to 20 times more than what's currently available. This growing demand for its data-center Graphics Processing Unit (GPU) is expected to continue in the coming years. The AI chip market is predicted to generate USD 311 billion in annual revenue by 2029, compared to this year's estimate of USD 123 billion. Nvidia still has a stronghold on the market. Even if its AI chip share drops by 70 per cent over the next five years, it could still bring in USD 217 billion because of its GPUs power. In short, Nvidia's data-center revenue may double in the next five years.
