World’s leading artificial intelligence (AI) chipmaker Nvidia suffered a record loss of $279 billion (9.5% of market capitalization), leading to the deepest single-day decline in market value for a U.S. company.
Moreover, the PHLX chip index has plummeted by 7.75%, its biggest one-day drop since 2020.
This record setback came on the heels of last week’s announcement that Nvidia’s third-quarterly revenue is expected to be approximately $32.5 billion. While this forecast was above the average analysts’ estimate, it fell short of meeting the high expectations (up to $37.9 billion) that had pushed the stock’s unprecedented rally.
Why have investors turned cautious about Nvidia?
These numbers are a major indication that investors have softened their optimism and are becoming more cautious about the rising AI technology that that has driven much of this year’s stock market gains.
These concerns were likely enhanced by the news that Nvidia’s new Blackwell processor lineup, which is set to be a major player in AI technology, has been facing manufacturing challenges.
Worries about slow payoffs from hefty AI investments have plagued other valuable Wall Street companies in recent weeks, with shares of Microsoft and Alphabet trading lower following their quarterly reports in July.
Additionally, the US Department of Justice has subpoenaed Nvidia as it investigates its antitrust marketing practices, which has resulted in further slump in shares.
The broader market selloff was provoked by weak manufacturing sector data, which in turn heightened investor concerns about a potential economic decline. Thus, expectations for a 50 basis point Federal Reserve rate cut on September 18 have increased from 30% to 37%.
The previous record for biggest one-day market capitalization drop for a U.S stock was held by The previous record was held by Facebook-parent Meta, which suffered a $232 billion fall in value in a day in February 2022.
