On Tuesday, Nvidia, one of the global leaders in manufacturing chips for artificial intelligence, faced one of the largest financial collapses ever seen in the stock market. In an event that may be remembered by many as one of the most dramatic in recent history, the company saw its market value plummet at an unprecedented rate.
Nvidia, which had once been the most valuable company in the world and is widely recognized for its crucial role in advancing AI technology, went through a crisis of immense proportions. What once seemed like an unstoppable growth trajectory suddenly transformed into a sea of difficulties. On Tuesday, the company experienced a shocking 9.5% drop in its stock price, resulting in a devastating $279 billion cut to its market value.
This dramatic decline not only marked the worst day in Nvidia’s history but also set a new record for market losses by a single company. The value lost far exceeds the previous record of $240 billion, which had been set by Meta in 2022, highlighting the magnitude of the crisis Nvidia is facing. This event not only raises questions about the company’s current challenges but also shines a spotlight on the volatility that can afflict even the most robust and innovative corporations.
The situation is a stark reminder of the fragility of the market and the complex forces that shape the financial destiny of the world’s largest companies.
To illustrate the magnitude of this striking decline, it’s important to put the numbers in perspective. On Tuesday, Nvidia lost $279 billion in market value, an amount equivalent to the combined value of only 27 companies worldwide. To give an idea of the scale of this loss, this figure surpasses the total stock value of American giants like McDonald’s, Chevron, and Pepsi. This contrast underscores the colossal scale of the crisis the company is facing.
Additionally, the financial impact on individuals involved with Nvidia is equally significant. Jensen Huang, the company’s CEO and largest individual shareholder, saw his personal fortune shrink by an astonishing $10 billion due to the sharp drop in Nvidia’s stock value. Huang ranks fifth among the largest shareholders, including major institutional investors like BlackRock, further emphasizing the magnitude of the loss.
Nvidia’s trajectory has been marked by highs and lows since June 18, when it reached a historic peak of $3.3 trillion in market value, making it the world’s most valuable public company at the time. However, since then, the company has faced a steep decline. As the U.S. economy begins to show signs of stress, investors have become increasingly skeptical of Nvidia’s extremely high valuations, as well as other stocks in the AI sector.
The concern among stockbrokers is palpable, with many fearing that economic weakness may lead companies to reassess their investments in promising but still risky and not fully proven technologies. This uncertain environment is raising doubts about the long-term viability of many of these technologies, which may be contributing to the turbulence Nvidia is experiencing.
Despite the impressive earnings reported last week, Nvidia failed to meet the higher expectations of investors. The company’s relatively lukewarm outlook, compared to more robust valuation expectations, resulted in a significant drop in stock prices.
Since its peak on June 18, Nvidia’s shares have plummeted more than 20%. Microsoft, which also made significant investments in AI technologies, saw its shares drop 12% from its most recent high. Similarly, TSMC, Nvidia’s main competitor in manufacturing AI chips, experienced an 18% decline since mid-July.
On the other hand, Intel, once the world leader in chip manufacturing, faces an even more challenging scenario. The company’s stock has plunged an astonishing 59% this year, reflecting its struggles to reinvent itself and compete effectively in the emerging AI market.
Beyond financial challenges, Nvidia may face a new set of legal problems. Recent reports indicate that the U.S. Department of Justice may have issued a subpoena to Nvidia as part of an antitrust investigation, according to Bloomberg. While CNN has not been able to independently verify the subpoena, both the Department of Justice and Nvidia have refrained from directly commenting on the investigation.
In response to the speculation, a Nvidia spokesperson stated: “Nvidia earns its success on merit, as evidenced by our benchmark results and the value we offer to our customers, who have the freedom to choose whichever solution best meets their needs.”
The Biden administration has taken a tough stance on large tech companies, conducting investigations and filing charges against giants like Apple, Google, and Amazon. However, the future of these investigations remains uncertain. It is unclear whether a possible Kamala Harris administration or a Donald Trump administration would continue these cases, though both have criticized tech companies for various reasons during their campaigns.
On Wednesday, Nvidia’s stock posted a slight increase of around 1%, after the significant 3% drop in the Nasdaq Composite on Tuesday. The stock market, in general, remained stable on Wednesday, reflecting a pause in the recent turbulence.
Despite the uncertainties, investors remain optimistic about Nvidia. The company’s shares continue to rise significantly, with an increase of 118% this year. Currently, Nvidia has an impressive market valuation of $2.7 trillion, placing it at a third of the value of giants Apple and Microsoft. Jensen Huang, Nvidia’s CEO, recently stated that demand for its next-generation AI chips, the “Blackwell” series, “far exceeds the available supply.” Even with growing competition, demand for Nvidia’s products continues to increase.
Nvidia’s investments are showing positive results so far. Huang highlighted that “people investing in Nvidia’s infrastructure are seeing immediate returns.” He explained that the company’s new graphics processing units (GPUs), which power artificial intelligence applications, are so efficient at processing data that they help clients save money quickly.
This scenario encourages optimistic investors like Dan Ives of Wedbush to view the recent drop in Nvidia’s shares as a buying opportunity. In a note sent to investors, Ives highlighted the transformation Nvidia has brought to the tech sector, comparing its GPUs to the “new oil and gold” of the information technology universe.
This perspective underscores the view that, despite the current challenges, Nvidia remains a transformative force in the market, with the potential to generate substantial returns for those who believe in its future.
