Nvidia’s H100 chips may be in high demand, but its stock has been anything but steady.
Shares of Jensen Huang’s semiconductor giant have plunged 20% from their all-time high on June 18, a drop that signals a bear market.
The company’s market cap has shrunk by nearly $780 billion—an amount equivalent to the entire value of Tesla or Eli Lilly.
Despite a recent relief rally, which briefly lifted the stock, gains were short-lived and it reverted to last week’s levels. The broader sentiment in the tech sector remains shaky.
The Futurum Group suggests that the current weakness reflects a broader rotation out of sectors that had a stellar run this year, rather than fundamental issues with Nvidia itself.
CEO Daniel Newman noted, “We’ve seen money flow out of Big Tech mostly, I think because they have had an incredible run-up.”
Nvidia’s graphics processors are crucial for training AI models like GPT-4. However, concerns about the return on AI investments from major cloud providers—Amazon, Microsoft, and Google—have dampened optimism.
Microsoft has warned of slowing revenue growth in its Azure cloud business, and its shares fell sharply on Wednesday.
Tesla, another key Nvidia customer, has also faced setbacks. CEO Elon Musk, who has long promised breakthroughs in autonomous driving, is now investing heavily in his custom silicon, Dojo, due to supply issues with Nvidia’s H100 chips.
Musk has talked about renting out spare training compute to third parties, a “Dojo-as-a-service” model that could be worth hundreds of billions if successful. This custom silicon could pose a threat to Nvidia’s dominance.
Despite the recent slump, Nvidia’s stock has more than doubled since January. Yet, it remains far from its peak spring performance when it briefly surpassed Apple and Microsoft to become the world’s largest company, valued at over $3.3 trillion.
The downturn has also affected Nvidia’s production partner, TSMC, which has seen its stock lose about $200 billion recently. It too is experiencing a relief rally.
Investor Jim Cramer described the stock’s plight as a “wasteland,” attributing the struggle to Nvidia’s lack of benefits from rate cuts. “It’s because Nvidia doesn’t benefit from rate cuts, so its stock gets kicked to the curb in this environment,” he said.
The business community is keenly observing these shifts, as any significant moves in Nvidia’s fortunes could impact broader economic conditions. Nvidia declined to comment on the situation.
Later Wednesday, the Federal Reserve is expected to outline plans for a rate cut in September, its first since March 2020.
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