In a tumultuous day for the markets, NVIDIA’s stock tumbled by 10%, marking its worst performance since March 2020 and erasing over $200 billion from its market valuation.
This downturn contributed to the S&P 500 dropping by 0.9%, as outlined by Bloomberg data.
The broader market also felt the impact, with the tech-heavy Nasdaq Composite dropping by 2.1% upon close.
Other major tech companies, including Advanced Micro Devices (AMD), Micron Technology, and Meta, saw their shares fall by 5.4%, 4.6%, and 4.1%, respectively. Super Micro Computer, noted for its server equipment beneficial to the AI surge, plummeted by an eye-watering 23%.
Netflix also dropped about 9% following its announcement to halt regular reporting of its subscriber numbers, overshadowing its otherwise strong earnings.
Kevin Gordon, a senior investment strategist at Charles Schwab, commented on the day’s market activities: “It’s a rough day for tech stocks. Anything that was doing well earlier this year is unwinding, but banks and energy are doing well with [defensive] staples.”
The stock market’s downturn reflects broader economic tensions and anticipatory anxiety over next week’s flurry of Big Tech earnings reports.
Analysts suggest that this retraction from so-called “AI stocks” is a recalibration of risk ahead of uncertain earnings forecasts.
Generative AI caused an awful lot of hype in early 2023, with discussions of imminent extinction, artificial general intelligence (AGI) that matched or exceeded human intelligence, and so on and so forth – all of which drummed up major bets on AI stocks.
Tech companies have also been plowing money into startups like OpenAI, but later, Anthropic received billion-dollar investments from Amazon and Google.
As the market braces for quarterly results from heavyweights like Microsoft, Alphabet, and Meta, the focus is also shifting toward NVIDIA’s forthcoming earnings report, which is due later in May.
NVIDIA’s case is a curious case. Its value doubled in 2023, but we’re not talking about a small jump here – it doubled from $1 trillion to $2 trillion dollars, becoming easily one of the most valuable and powerful corporate entities to have ever existed in the modern era.
However, NVIDIA has yet to build and ship thousands of chips, making its colossal valuation very much speculatory for now.
Additionally, the market is contending with geopolitical tensions and a cautious outlook from the US Federal Reserve, which may limit rate cuts to a mere quarter-point this year, if any.
The drop also coincides with Meta’s release of Llama 3, which, together with other open-source models like Grok, is drawing attention away from OpenAI in particular.
While that likely does not impact NVIDIA’s stock, it still signifies a maturing period for generative AI where companies and investors align their R&D investments with returns.
More AI hype and growth is probably only just around the corner, though.
