4 Big reasons behind Nvidia’s record $250 billion-plus loss in one day, biggest-ever for an American company

Shares of AI chip giant Nvidia appear to be in a freefall. Earlier this week, Nvidia stock tumbled 9.5% in the deepest ever single-day decline in market value for a US company. The company’s market capitalisation declined by $279 billion, marking the steepest single-day fall for an American company. Since peaking on June 18, Nvidia’s shares have lost roughly 20% of their value.Called the poster boy of the AI boom, Nvidia’s stock has seen a jump of more than 650% since the start of the year 2023. Here are the likely reasons behind the massive fall.
Fears of US government’s regulatory pressure
Tech giant Nvidia is facing increased regulatory scrutiny as the US Department of Justice has issued a subpoena to investigate potential antitrust practices. The company has maintained its innocence, claiming fair competition. However, analysts warn that regulatory oversight could intensify. Last week, Nvidia disclosed requests for information from both U.S. and South Korean regulators. The company’s extensive investments in other AI companies have raised concerns among regulators. According to a report in Reuters, quoting investment analyst Dan Coatsworth, “Nvidia’s influence extends beyond its own chips, potentially leading to questions about preferential treatment for its investees or customers.”

Analysts ‘unhappy’ with earnings report

Investors’ latest jitters are also said to be linked to the company’s quarterly forecast that failed to meet analysts’ lofty expectations. Despite steady growth and profit, Nvidia’s quarterly forecast failed to meet expectations of investors even as second quarter revenue and profit topped estimates. “Those earnings last week were fine; they exceeded expectations,” told Steve Sosnick, market strategist at Interactive Brokers, to Reuters. “But the magnitude of the beats is shrinking quarter by quarter and that’s not lost on investors.”

Weakness in chip stocks

The selloff extended to Wall Street’s chip index, which dropped 7% as investor optimism about AI softened.

Concerns that AI boom may be overrated

The broader chip sector has also experienced a downturn, with the Wall Street chip index dropping 7%. Investor optimism about the AI boom has been tempered by concerns about delayed returns on significant investments. Nvidia’s planned investment in OpenAI, valued at over $100 billion, further highlights the challenges and uncertainties in the AI market.
The recent selloff in chip stocks, including Nvidia, reflects growing investor skepticism about the immediate benefits of the AI boom. As regulatory scrutiny intensifies and the market grapples with the long-term implications of AI, Nvidia’s future remains uncertain.