NVIDIA’s Value Drops Almost 10% & $300B, Takes Others Along

It’s been an exciting couple of years for NVIDIA, as the company gained a prominent position in the artificial intelligence (AI) industry. This came about because of its powerful and high-quality GPUs (Graphics Processing Units) and its vitality in the training of generative AI models.

Such was the might of the company that it grew from a valuation of $1 trillion to $2 trillion in just 270 days.

In contrast, it took the company 24 years to reach its first trillion-dollar valuation. That’s impressive, right?

Here’s something more admirable – it took the company just 96 days to reach a valuation of $3 trillion, as the company even topped the charts of the most valuable company by market capitalization.

Ahead of this, the year has been filled with acquisitions, collaborations, partnerships, product launches and more. The company even brought its generative artificial intelligence (GenAI) capabilities to robotics, medicine and other industries.

However, the company has had to endure some tough days too, especially in the last few weeks, starting with forecasts not meeting investors' expectations, resulting in a drop in its market value.

Since then, the company has been on a slight downward spiral as far as its shares go, taking the entire semiconductor manufacturing industry with it, as per the latest updates.

So, what are the new updates regarding NVIDIA and the AI chip market? Let’s explore!

What’s Happening With NVIDIA’s Shares In The Market?

As per reports, NVIDIA’s shares witnessed a drop of nearly 9.5%, resulting in a wipe-out of almost $300 billion ($279 billion to be precise) in its market capitalization.
This marked the biggest one-day market capitalization drop for a stock in US history, which beat Facebook’s $232 billion fall in February 2022.
Despite the company reporting over $30 billion in revenue for the quarter ending in July, the company remained 118% up for the year post the plunge.
At the same time, the company’s drop affected other AI chip companies, pulling down Intel almost 8%, Marvell 8.2%, Broadcom 6%, AMD 7.8% and Qualcomm around 7%.
Furthermore, the VanEck Semiconductor ETF (SMH), an index that tracks semiconductor stocks, had its worst day since March 2020 falling 7.5%.
In the last year, the stocks of chip manufacturers have been climbing as the market expects the AI boom to continue.
However, on Wednesday, NVIDIA’s stock climbed 1%.
One of the key reasons for NVIDIA’s drop is said to be the subpoena the company received from the United States Department of Justice (DoJ) a day before the drop.

Source

What Is The NVIDIA DoJ Subpoena About?

As per a report by Bloomberg, the US Department of Justice has sent NVIDIA a subpoena, as the government agency investigates antitrust practices in the AI giant.
The cause for concern rises as the company makes it tougher for its customers to switch to other suppliers, while penalizing them if they don’t exclusively use NVIDIA’s AI chips.
The report cites people familiar with the investigation.
The DoJ, which had previously sent questionnaires to the company, has now opted for legally binding requests that have also been delivered to other companies.
An NVIDIA spokesperson said, “Nvidia wins on merit, as reflected in our benchmark results and value to customers, who can choose whatever solution is best for them.”
When the DoJ launched the probe, a spokesperson for the company said, "We compete based on decades of investment and innovation, scrupulously adhering to all laws, making Nvidia openly available in every cloud and on-prem for every enterprise, and ensuring that customers can choose whatever solution is best for them.”
The US DoJ did not provide a comment.
[UPDATE]: A day after reports suggested NVIDIA had received a subpoena, an NVIDIA spokesperson denied the reports, saying, “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.”

Do you think the drop in stock prices and market valuation for NVIDIA and other AI chip companies will result in long-term effects or is this occurrence a one-off? Do you think the growth of AI has peaked or will the sector continue booming the way it has since the last few years?

Let us know in the comments below!

First published on Wed, Sep 4, 2024

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