American technology company Nvidia Corporation, whose CEO Jensen Huang was in the news recently for his LinkedIn update, suffered a historic 9.5% nosedive on Tuesday amid AI concerns. This is the deepest-ever single-day decline in market value for the AI heavyweight company.
With about $279 billion loss in market capitalization, investors are cautious about emerging AI technology that has filled much of this year’s stock market gains. Nvidia’s record one-session loss in stock market value is greater than the $232 billion decline suffered by Facebook-owner Meta Platforms (META.O) in 2022 when the social media company issued a dismal forecast.
In the biggest drop since 2020, the PHLX chip index (.SOX) opened a new tab and plummeted 7.75% in one day. Nvidia gave a quarterly forecast last Wednesday that failed to meet the lofty expectations of investors who have heavily invested in its stock, proving to be the latest distrust about AI.
Todd Sohn, an ETF strategist at Startegas Securities said, “Such a massive amount of money has gone to tech and semiconductors in the last 12 months that the trade is completely skewed.”
As per reports, Intel (INTC.O) saw a drop of nearly 9% after CEO Pat Gelsinger and key executives are expected to present a plan to the company’s board of directors to cut off unnecessary businesses and revamp capital spending at the trembling chipmaker.
Worries about slow payoffs from heavy AI investments have dogged Wall Street's most valuable companies. Following their quarterly reports in July, shares of Microsoft (MSFT.O) and Alphabet (GOOGL.O), opens new tab trading lower.
On Tuesday, BlackRock strategists wrote in a client note that 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," wrote in a client note on Tuesday.
In 2024, Nvidia had almost tripled after its July record with its recent losses of 118% year to date. The dip in chip stocks on Tuesday showed wide declines on Wall Street with the Nasdaq (.IXIC) opening a new tab dropping 3.3% and the S&P 500 (.SPX), opening a new tab down 2.1%.
Following a huge dip, Investors expect the Federal Reserve to cut interest rates by 25 basis points in its September 18 policy announcement. The expectations of 50 basis points cut rose to 37% from 30% after data on Tuesday showed soft activity in the manufacturing sector.
Investors will get a host of data on the labour market this week, culminating in Friday’s key government payrolls report. Meanwhile, market strategists show concerns about what the job numbers are going to show about the recent trend of dip in AI investment.
The chip index is now up 14% in 2024, just under the S&P 500’s 16% gain. The mean analyst estimated the annual net income through January 2025 with a rise of $70.35 billion from $68 billion ahead of last week’s report following Nvidia’s quarterly report last week.
In line with its two-year average, the increased earnings estimates and Nvidia’s share losses have the market now trading at 34 times expected earnings, down from over 40 in June.
Meanwhile, another chipmaker that has benefited from the boom in AI computing, Broadcom (AVGO.O), opens a new tab with a 6.2% fall ahead of its quarterly report on Thursday.
Recently, Nvidia CEO Jensen Huang was in the news for publicly highlighting his humble beginning as a dishwasher at an eatery before creating one of the world’s leading AI chip companies in 1993.
Before Nvidia, Huang worked as a dishwasher at an eatery called Denny’s from 1978 to 1983. His post shared on LinkedIn surprised many users as they lauded the tech mogul’s inspiring journey so far.
Huang’s interview with a US media channel was also making rounds on the internet, especially for his inspiring words. “You cannot show me a task that is beneath me.” “...I used to be a dishwasher and cleaned toilets….I don’t know what to tell you, that’s life…,” he said.
Recently, Nvidia CEO Jensen Huang was in the news for publicly highlighting his humble beginning as a dishwasher at an eatery called Danny's from 1978 to 1983 before creating one of the world’s leading AI chip companies in 1993. His post shared on LinkedIn surprised many users as they lauded the tech mogul’s inspiring journey.
NVIDIA’s Jensen Huang, on leadership:
— Carl Quintanilla (@carlquintanilla) March 8, 2024
“No task is beneath me — because, remember: I used to wash dishes. I used to clean toilets. I cleaned a LOT of toilets. I’ve cleaned more toilets than all of you combined.”$NVDA @StanfordGSB pic.twitter.com/jzK5yVD0Eh
Huang’s interview with a US media channel was also making rounds on the internet, especially for his inspiring words. “You cannot show me a task that is beneath me.” “...I used to be a dishwasher and cleaned toilets….I don’t know what to tell you, that’s life…,” he said.
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