$279 billion. This is the astronomical amount that Nvidia lost in a single day of trading.
Is the gold rush of artificial intelligence starting to see its first setbacks? Nvidia, long considered the golden goose of the sector, just took a serious hit in the stock market, which could mark a turning point in how investors view the company.
Nvidia’s Plummeting Stock
On Tuesday, September 3, 2024, Nvidia experienced a disastrous day on the stock market. The AI chip giant’s stock plunged by 9.53%, dropping from $119.37 at Monday’s close to $108 by the end of Tuesday’s session. This sharp decline resulted in a loss of $279 billion in market capitalization. To put things in perspective, it’s as if a company the size of Netflix disappeared overnight. This is the largest single-day loss in value ever recorded by an American company.
But what exactly is “market capitalization”? It’s simple: imagine the company is a cake (the company itself) cut into many small slices (its shares). The market cap is the total value of all those slices added together. When the price of each slice drops, the total value of the cake shrinks. In Nvidia’s case, it’s as if a massive slice of the cake was taken out all at once.
This downfall isn’t an isolated case. Other tech giants, all involved in the AI race, also took a hit: Microsoft lost 1.85%, Apple 2.72%, and Google dropped by a significant 3.94%.
The Reasons Behind the Drop
So, why the sudden chill over AI, the technology that’s supposed to revolutionize the world? Several factors are at play.
First, there’s what’s being called the “return to reality.” BlackRock, the world’s largest asset manager, released a report that had a bit of a cold-shower effect. Essentially, they’re saying that companies pouring tons of money into AI are starting to worry. Why? Because the long-anticipated profits are taking their sweet time to show up.
Second, there’s a disconnect between what investors want (cash, now!) and what tech companies are offering (grand projects for later).
Lastly, Nvidia has another problem on its hands: the U.S. Department of Justice has issued a subpoena to the company. They want to investigate whether Nvidia may have bent the rules of competition a bit too much.
A temporary sluggishness?
All this leads us to ask questions about the future of AI on the stock market. Was it just a big bubble starting to deflate? Or just a little temporary slack?
What is certain is that AI remains a technology with enormous potential. But as with any revolution, there is always a moment when initial enthusiasm clashes with harsh reality. Companies now need to prove that their investments in AI can truly translate into real benefits.
For Nvidia and other tech giants, the challenge is clear: it is no longer enough to promise the moon, we must deliver tangible results. Investors will probably become more cautious and demanding in their choices.
