Nvidia's Market Value Evaporates by Over $279 Billion: AI Giant Falling From Grace?

Nvidia's Market Value Evaporates by Over $279 Billion: AI Giant Falling From Grace?Nvidia, the AI chipmaking giant and once the world's most valuable company, has suddenly found itself in unprecedented trouble. On Tuesday, its stock price plummeted 9

Nvidia's Market Value Evaporates by Over $279 Billion: AI Giant Falling From Grace?

Nvidia, the AI chipmaking giant and once the world's most valuable company, has suddenly found itself in unprecedented trouble. On Tuesday, its stock price plummeted 9.5%, wiping out a staggering $279 billion in market value, surpassing Meta's $240 billion loss in 2022. The drop is so significant that only 27 companies globally have a market value comparable to what Nvidia lost on Tuesday.

The $279 billion market value wipeout even exceeds the entire stock value of several large American companies, including McDonald's, Chevron, and PepsiCo. Nvidia's CEO Jensen Huang is the company's largest individual shareholder. Even factoring in institutional investors like BlackRock, Huang remains Nvidia's fifth-largest shareholder. As Nvidia's stock plunged, Huang's personal wealth shrank by $10 billion on Tuesday.

Nvidia's stock has been on a downward trajectory since hitting an all-time high of $3.3 trillion on June 18. Investors are starting to question the lofty valuations of Nvidia and other AI stocks as the US economy shows signs of stress. Market traders fear that economic weakness could make companies more cautious about investing in this promising but still risky technology.

Despite posting a strong earnings report last week, Nvidia's relatively subdued outlook disappointed investors, causing further stock declines. Nvidia's stock has fallen over 20% since its peak on June 18. Microsoft, a major investor in AI technology, has also dropped 12% from its recent highs. TSMC, Nvidia's biggest AI chip manufacturing rival, has seen its stock fall by 18% since mid-July. Intel, once the world's largest chipmaker, has seen its stock decline by 59% this year as it faces unique challenges in its attempt to reinvent itself and enter the AI field.

Potential Legal Issues

However, Nvidia might face another challenge. The US government is reportedly investigating the company for potential antitrust violations. Reports suggest that part of the reason for Nvidia's large stock drop on Tuesday was the issuance of subpoenas related to the antitrust investigation by the US Department of Justice. However, the DOJ has declined to comment on whether an antitrust investigation is underway.

Nvidia stated on Wednesday afternoon that it had not yet received subpoenas from the DOJ. A company spokesperson said in a statement, "We have inquired with the Department of Justice and have not received any subpoenas. However, we are prepared to cooperate fully with regulators and answer any questions they may have about our business."

The US government has been taking a tough stance on tech giants, launching investigations and filing charges against companies like Apple, Google, and Amazon. It remains unclear if the next US administration will continue pursuing these cases, but both candidates during the election campaign had criticized tech companies.

Nvidia's stock fell another 1.7% on Wednesday. The Nasdaq Composite, after dropping 3% on Tuesday, dropped another 0.3% on Wednesday.

Market Outlook

Despite these challenges, AI bulls remain confident in Nvidia. Nvidia's stock has risen 118% year-to-date, reaching a market value of $2.7 trillion, making it the third most valuable company globally, behind Apple and Microsoft. Huang stated last week that demand for the company's latest "Blackwell" architecture AI chips is "far outstripping supply." Despite growing competition, demand for Nvidia's chips continues to rise.

Huang said these investments are now starting to pay off. "Customers who have invested in Nvidia's infrastructure are seeing immediate returns," Huang stated last week. He emphasized that Nvidia's newly introduced GPU chips are highly efficient in processing data, leading to significant cost savings for customers.

Because of this, Dan Ives, an analyst at Wedbush Securities, believes Nvidia's stock decline is actually a buying opportunity. "Nvidia has reshaped the technology landscape and global landscape. Their GPUs have become the new oil and gold of the IT world," Ives stated in a note to investors on Tuesday.

Nvidia's stock fluctuations reflect the current complex landscape of the AI industry. On the one hand, AI technology is rapidly developing, bringing unprecedented opportunities across industries. On the other hand, economic uncertainty and regulatory risks cast a shadow over this sector. Whether Nvidia can overcome its current challenges and continue to lead the development of AI remains to be seen.