Nvidia’s Magic Wearing Off? Investors Lose $646 Billion in 3 Days
- Nvidia shares fell by more than 15% in a span of 3 days, wiping off $646 billion of its market cap.
- This is the biggest 3-day loss in value of any company in history.
- However, the stock has shown signs of recovery, as it increased 6% after the fall.
Nvidia has had a wonderful one year or so, thanks to its investments in AI chips, which are reaping rewards now. The company became the most valuable company in the world when it reached a market cap of $5.1 trillion on Wednesday this week.
However, this happiness was short-lived as what followed was a never-seen-before bloodbath. Thursday, 20th June, saw a 3.54% fall in the stock price. This was followed by two more continuous days of fall, with the biggest fall on Monday 24th June, where the stock plummeted 6.68% in a single day.
This 3-day trading session wiped out $646 billion of Nvidia's market cap and shareholder wealth. This is also the biggest loss shareholders have had to face in a single stock in a span of three days, as per Bloomberg.Since then, the stock has shown some signs of recovery. It rose 6.76% the next day and has been trading flat after that. The stock closed at $123.99 on Thursday, which is still 12% below its high on Thursday last week (20th June).
That said, even after this fall, Nvidia has given some staggering returns during the last six months.
The stock was trading close to $47 in January this year and is now at $123.99 - a momentous return of 150% (more than double).
In fact, during the first 3 months of 2024, Nvidia added a total of $1 trillion in its market cap within a span of just 67 days.
This unprecedented growth has been attributed to the company's shift towards AI chips. Last year, Nvidia's revenue from gaming units fell to just 17% from 53%. On the other hand, its AI data center's revenue increased to 78% from 25%.
Why Is There a Sudden Fall in Stock Prices?No stock can keep rising linearly. Every stock follows the general ebbs and flows of the stock market. And that's just what might be happening to Nvidia.
Seeing the potential of the AI industry, many investors got on the Nvidia train earlier this year. Since the stock has already delivered close to 150% returns, these short-term investors are probably booking some gains, which leads to a short-term plunge in stock prices.
However, the possibility of people waking up to the limited potential of AI cannot be ruled out. Sure, AI can do a lot of jobs better than humans and even replace some jobs. But AI cannot completely outdo professional careers.
For example, AI chatbots can help you find errors in codes or even compile complex codes, but they cannot fill the shoes of a professional developer. Similarly, AI can help you retrieve information or make art, but it cannot do the job of a professional artist.
These improvements may not be substantial in the long run and investors might have figured that out. This decrease in price may also indicate the exit of a substantial Nvidia investor or a major mutual fund house.
However, the recently concluded Computex 2024 event paints an encouraging picture for the AI industry. Almost every major tech company, including Nvidia, kept AI at the forefront in their keynotes.
- Nvidia launched Project G-Assist - an AI-powered gaming assistant that will guide gamers in real time.
- The company also announced the introduction of ACE Digital humans to RTX AI PCs, which will result in high-quality inference.
- Nvidia is also working on GR00T - a new-age humanoid robot that can quickly adapt to real-life problems and situations.
Other companies like AMD, Qualcomm, and Intel focused a lot on integrating Artificial Intelligence with existing technologies.
This is a strong indicator that the demand for AI chips isn't going to stop anytime soon. Investors need not worry about short-term stock price falls, especially when a fall of 6% is followed by a rise of 6% the very next day.
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