Nvidia Sees Biggest Single-Day Loss Ever for a U.S. Company

Nvidia has experienced a dramatic downturn in its stock value, suffering a decline of 9.5%. This drop, which equates to a staggering $278.9 billion loss in market capitalization, marks the largest single-day loss ever recorded by a publicly traded U.S. company.

The fall comes as investors express growing concern over the state of the artificial intelligence (AI) sector and broader economic signals that could indicate a recession. Recently released metrics show a continued decline in manufacturing jobs, marking the third consecutive month of contraction. This has contributed to a negative outlook, particularly ahead of a significant employment report expected later this week.

Compounding these worries are indications from the Federal Reserve, suggesting that interest rate cuts might be on the horizon—potentially larger than initially anticipated. This prospect has led to a heightened sense of uncertainty among investors regarding the economic landscape.

At an individual company level, analysts are also starting to question Nvidia’s performance. Bill Blain, founder of Wind Shift Capital, pointed to Nvidia’s soaring valuation as a potential concern. Notably, he indicated that many employees are now financially comfortable, with less than one-third facing “any real daily financial pressure.” This situation raises questions about employee motivation and productivity.

Further complicating the investment climate are new warnings regarding AI spending. Market experts, such as Michael Cembalest from J.P. Morgan Asset Management, indicate that although tech giants have invested heavily in AI, the returns on these investments remain uncertain. Similarly, investment management firm Blackrock has echoed concerns about whether these expenditures will translate into future profits and how long that process might take.

This broader apprehension towards Nvidia’s future is not isolated; the entire semiconductor sector faced declines on the same day. Competitors such as Intel, AMD, and Qualcomm also saw significant drops in their stock values, with Intel falling by 8.8%, AMD by 7.8%, and Qualcomm by almost 7%. The overall semiconductor index, represented by VanEck Semiconductor, dropped by 7.5% as well.

In a potentially troubling development for Nvidia, after hours trading reflected additional losses. The company’s stock fell by 2.4% following news that the U.S. Department of Justice had issued a subpoena to Nvidia as part of an investigation into possible antitrust violations.

This recent drop in valuation for Nvidia stands as a stark reminder of the volatility seen in the tech sector, with parallels drawn to previous significant losses from other major companies. For instance, Meta Platforms Inc. suffered a $237 billion loss in a single day back in February 2022, while Apple previously held the record for a daily market cap loss of $180 billion in September 2020. Notably, this recent performance has placed Nvidia in the spotlight for experiencing the largest one-day market cap decline in U.S. corporate history.

Such turbulent market conditions and the ongoing scrutiny of Nvidia’s business practices signal a challenging period ahead for the company and its investors as they navigate a landscape rife with economic uncertainties and unmet expectations in the rapidly evolving AI market.

Source: Business Insider