Once the most valuable company in the world, Nvidia has suffered major setbacks in the last few months. The most recent one came on Tuesday when the company’s share plunged 9.5% or $279 billion. This marked the deepest single-day decline in the history of the US stock market. Analysts state that the main reason for the deep plunge is the waiving investor’s optimism about artificial intelligence and its future.
Nvidia Lost $279 in its market cap, a sign that investors are becoming more cautious about emerging technologies like AI, which had fueled the company’s value in the past few years. Due to this massive dump, the PHLX chip index also witnessed a massive decline. The index dropped 7.5%, its biggest drop since 2020. One of the reasons why investors seem to be hanging in the middle when it comes to AI technology is the recently released quarterly report of Nvidia.
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Companies like Nvidia, Intel, Google and Microsoft have invested massive amounts of investors’ money in AI technology, and slow returns have impacted the companies’ performance in the stock market. Along with Nvidia, many other tech giants, including Intel, Google and Microsoft, witnessed a decline in their share prices. A strategist at BlackRock wrote in a client note, “Some recent research has questioned if the revenues from AI alone will eventually justify this wave of capital spending on it. When assessing AI capex by individual companies, investors must consider if they are making the best use of their balance sheets and capital.”
According to LSEG’s data, this is the highest decline in the American Stock market’s history and greater than Meta’s loss of $232 billion in 2022 when it issued a dismal forecast on its platform. However, Nvidia’s annual net income estimates have climbed from $68 billion to $70.35 billion. This means that the chipmaker is now trading at 34 times their expected earnings, down from over 40 times in June.
