Nvidia has taken two major hits in the past four working days.
First, investors punished the company for not beating expectations enough when it reported earnings on August 28.
And on Tuesday, its stock slid 9.5%, shedding $278.9 billion in valuation — the biggest single-day loss ever recorded by a US company.
The wipeout is tied to concerns about the health of AI and the US economy.
A metric for manufacturing jobs that was released on Tuesday shrank for the third consecutive month, and both major indexes took a hit. There's also bearish sentiment about a US employment report later this week. In just two weeks, analysts expect the Federal Reserve to announce interest-rate cuts, which could be larger than they first expected, sending omens about the chances of a recession.
At a company level, one strategist flagged that Nvidia was flashing a big "sell" sign to investors.
Bill Blain, a longtime financial strategist who's the founder of Wind Shift Capital, wrote in a note on Tuesday that Nvidia's soaring valuation had made many of its employees very wealthy. Citing numbers from a recent poll, Blain said that left less than a third of Nvidia's staff with "any real daily financial pressure upon them," which should make investors question their motivation and Nvidia's productivity.
There were also renewed warnings about AI spending and how it would take time to materialize into results for investors.
Michael Cembalest, the chairman of market and investment strategy at J.P. Morgan Asset Management, said investors were looking past GPU sales and focusing on whether the tech giants on Nvidia's customer list could make money from the hundreds of billions they had spent on AI. Blackrock echoed a similar sentiment: Investors are debating whether the dollars in spending will show up in future bottom lines and how many years it will take.
These concerns explain why Nvidia wasn't the only chipmaker that took a hit on Tuesday. Intel fell 8.8%, AMD dropped 7.8%, and Qualcomm fell almost 7%. An overall chip index — VanEck Semiconductor — was down 7.5%.
Nvidia's stock fell 2.4% after hours after the US Department of Justice subpoenaed the company as part of a probe into whether it violated antitrust laws.
Nvidia's massive valuation drop has come more than two years after Meta lost $237 billion in market value in a single day in February 2022. Apple, which held the record before that, lost $180 billion in one day in September 2020.
The 2022 rout was Meta's second time on the chart. In July 2018, the company shed $119 billion in market cap in a single day after reporting slowing growth in its second-quarter earnings. It was the largest one-day market cap slump at the time.
Correction: September 4, 2024 — Because of an editing error, an earlier version of this story misstated when Nvidia most recently reported its earnings. It was on August 28, not September 28.
