Nvidia’s Jensen Huang began learning the meaning of the phrase “the higher they go, the harder they fall.”
After briefly outperforming Microsoft and Apple last week – and indeed entire European stock markets – the company behind the AI chip boom saw the fastest single divestment in history.
Over the past three days, nearly $430 billion has been wiped off Nvidia’s market value, the largest three-day loss in value of any company in history. If you measure the decline from its peak during Thursday, more than half a trillion dollars has gone up in smoke. This means almost the entire value of Tesla has driven down its stock, posing bigger problems for the stock market overall.
“If Nvidia corrects strongly in the coming months, it will become very difficult for the (S&P 500) to continue higher,” said Barry Bannister, chief equity strategist at Stifel Financial Corp. Tell the Financial Times.
It also didn’t help that the founder and CEO had inadvertently added to the pressure by cashing in his own money. Huang’s Rule 10b5-1 trading plan, which automatically implements sales when certain conditions are met, liquidated 720,000 shares for 720,000 shares. Nearly $95 million This month alone.
The timing is unfortunate because it comes just before Wednesday’s annual shareholder meeting and two weeks after a 10-for-1 stock split made it easier for retail investors to buy into the company. One indicator that many amateur traders may be taking profits in Nvidia is the sudden decline in Bitcoin, an asset that is closely linked to the retail market since it has been largely untouched by institutional investors.
Speaking to Yahoo Finance, Paul Meeks, co-CEO of IT at Harvest Portfolio Management, blamed the decline on profit taking and talk of AI data center spending peaking.
“The key here is to make investors feel comfortable that there is a long runway yet.” Tell The program is on Monday.
Firstly @nvidia DGX H200 in the world, hand-delivered to OpenAI and customized by Jensen “to advance AI, computing and humanity”: pic.twitter.com/rEJu7OTNGT
– Greg Brockman (@gdb) April 24, 2024
While Meeks argued that Nvidia still looked cheap compared to Cisco when it surged during the dot-com era on the back of internet infrastructure spending, the Nvidia stock chart indicated further pressure until the price stabilizes around a support line such as the 50-day moving average.
“So (I’m) comfortable with the fundamentals, I’m not comfortable with the technicals,” he said, adding that once the large selling volumes start to fade, he “tends to come back” and add to his large position in the stock. .
The company did not respond to the request luck To comment.
Undisputed leader with Elon Musk and OpenAI as key clients
Nvidia’s cutting-edge H100 chips are designed specifically for data centers that train neural networks, including large language models like GPT-4 and other forms of generative AI. One of the most prolific buyers is Elon Musk, who is ordering more chips than he claims his company Tesla can install just to ensure he gets them faster than any of his tech rivals.
However, its most famous client remains OpenAI, whose creation of ChatGPT in November 2022 sparked the GenAI gold rush. In April, Huang made a rare move Hand delivered The company’s personally signed DGX server is equipped with the first H200 training chipset offering nearly double the GPU memory of its predecessor.
Nvidia’s status as an undisputed global leader — and whose AI training chips are a matter of US national security — has led to a rally in its stock price that can only be compared to Tesla’s buildup in 2020.
On Monday, Deutsche Bank explained the historical nature of Nvidia’s rise by publishing a chart comparing the market cap to the value of Warren Buffett’s investments. “It took Berkshire Hathaway more than a century to go from nothing to just under a trillion dollars,” she wrote. “It took 30 days for Nvidia to go from a $2 trillion market cap to a $3 trillion market cap.”
Part of this insane volatility stems from the challenge of properly assessing the trajectory of future revenues, earnings, and cash flows when a company’s fundamentals improve at a speed that no one, including Nvidia, expected.
For now, stocks are expected to see a rebound when trading opens on Tuesday, but there could be more short-term pain waiting for Nvidia bulls as Meeks suggested. Another well-known Wall Street adage is “The trend is your friend.”