Historic Plunge: Nvidia Loses $600 Billion in Market Cap in a Single Day

stock market

On Monday, Nvidia (NVDA) experienced a seismic market event, losing nearly $600 billion in market capitalization, marking the largest single-day drop for any company in U.S. history. The company’s stock plummeted by nearly 17%, closing at $118.58, which was its worst performance since the early days of the Covid-19 pandemic in March 2020. This significant decline followed Nvidia’s brief reign as the world’s most valuable publicly traded company, surpassing Apple (AAPL) the previous week, and led to a 3.07% drop in the Nasdaq (COMP).

The catalyst for this selloff was the emergence of DeepSeek, a Chinese AI lab, which introduced a groundbreaking open-source large language model. Developed in just two months with a budget of less than $6 million and utilizing Nvidia’s lower-end H800 chips, DeepSeek’s model has raised concerns about the sustainability of Nvidia’s dominance in the AI chip market. Nvidia’s GPUs are pivotal in the U.S., powering AI data centers for tech behemoths like Alphabet (GOOG, GOOGL), Meta (META), and Amazon (AMZN).

Despite the immediate market reaction, analysts at Cantor Fitzgerald argue that the long-term demand for computational power in AI will only increase, contrary to fears of a spending peak on GPUs. They maintain a positive outlook on Nvidia shares, believing that the evolution of AI technologies will necessitate even more compute resources, not less. However, after Nvidia’s stock surged by nearly 240% in 2023 and an additional 170% the previous year, investors are evidently sensitive to any signs of a potential slowdown in AI investment.

The ripple effect was felt across other tech companies, with Broadcom, another key player in AI chip manufacturing, seeing its market cap decrease by $200 billion with a 17.40% drop in stock price. Data center companies like Dell Technologies Inc. (DELL), Hewlett Packard Enterprise (HPE), and Super Micro Computer (SMCI), all heavily reliant on Nvidia’s technology, also experienced significant declines, with drops of 8.70%, 5.83%, and 12.62% respectively.

According to CNBC, Nvidia’s Monday loss was more than twice what it lost in September, which had previously been the record for the largest single-day market value loss, eclipsing Meta’s $232 billion drop in 2022. The scale of this loss is such that it exceeds the total market capitalization of companies like Coca-Cola (KO), Chevron (CVX), Oracle (ORCL), and Netflix (NFLX) combined. This event also saw Nvidia’s CEO, Jensen Huang, lose approximately $21 billion in personal wealth, dropping him to 17th on Forbes’ list of the world’s richest people.

The weekend surge in popularity for DeepSeek, which momentarily outranked ChatGPT as the most-downloaded free app in the U.S. on Apple’s App Store, highlights the competitive landscape of AI development, especially in light of recent U.S. restrictions on chip exports to China. Venture capitalist David Sacks, appointed by Trump to lead AI and crypto policy, noted on X that DeepSeek’s achievements underscore the need for U.S. vigilance in the AI race without complacency.

Currently, Nvidia stands as the third most-valuable public company, trailing behind Apple and Microsoft, signaling a volatile yet dynamic future in the tech sector as companies vie for supremacy in AI technology.

WallStreetPit does not provide investment advice. All rights reserved.

Be the first to comment

Leave a Reply

Your email address will not be published.


*

This site uses Akismet to reduce spam. Learn how your comment data is processed.