Published in Svenska Dagbladet, 2024-09-04. Translated from Swedish.
2,800 billion kronor were erased in a single day when the shares of hyped chipmaker Nvidia fell sharply on Tuesday evening. Why are they falling now?
It was a broader collapse across the chip and semiconductor sector on American markets on Tuesday. The category — which includes companies like Intel, AMD and Qualcomm — had its worst collective day since March 2020. Nvidia, as the market leader in the AI field, was hit hardest given how extreme its rise has been. In total Nvidia fell 9.5 percent on Tuesday and slipped a little further in after-hours trading.
One contributing factor is likely the growing anxiety that AI development will take longer than expected and not be as transformative as many companies had hoped. If companies like Microsoft and Google decide to invest less — or simply more slowly — in the AI sector, that would hit Nvidia directly.
It is also worth remembering how high the starting point was. Nvidia had gained 118 percent on the stock market so far this year, and with a market capitalisation of an almost incomprehensible 27,000 billion kronor, even small adjustments translate into enormous sums of money.
When Nvidia reported its quarterly results last week the numbers were stellar — and still not enough to meet market expectations. Nvidia’s profit nearly tripled and revenue grew 130 percent. Despite that, the report was received with mild scepticism as the forward guidance was not as glittering as in previous quarters. With sky-high expectations from the outside world, and a position as one of the most important companies in AI development, it is a stock watched with extraordinary scrutiny. The slightest signal that something may be stirring can create uncertainty.
Another factor that may have contributed has nothing directly to do with Nvidia. Monday was Labor Day in the United States — a public holiday that traditionally marks the end of summer. Everyone is back at work after the holiday period, and it acts as a kind of reset ahead of the coming autumn. It is possible that parts of the market reconsidered the sector somewhat during the summer break and became a little more cautious.
What happens next for Nvidia? The company has just reported quarterly results, so it will be several months before we see new figures. However, Bloomberg reported late on Tuesday evening that Nvidia is under investigation for suspected antitrust violations. That the Department of Justice was looking into this was already known — but the investigation has now advanced further and Nvidia has been formally required to provide internal information, which can be seen as an escalation.
Antitrust scrutiny has increased significantly in the tech world recently; Google was among those found to have an illegal monopoly in the search market. In Nvidia’s case it is not entirely clear what the DOJ is looking for, but Bloomberg reports it may relate to how customers are treated differently depending on how many different categories of products and services they purchase from Nvidia.
Should it emerge that Nvidia has in some way impeded fair competition, it could substantially alter the company’s business model and outlook. This type of investigation — regardless of outcome — generally takes a long time. An immediate concern about this specific issue is therefore unlikely to be the primary cause of Tuesday’s fall.
