Here Are The Top 3 Reasons Why Nvidia Is Falling

Date: September 04, 2024

Nvidia’s stock price slumped over 10% in the US market after multiple factors caused a negative sentiment among investors.

Since last year, Nvidia emerged as a standalone market leader in the semiconductor chip maker industry. The stock price of Nvidia has more than doubled in one year, making it one of the first trillion-dollar valuation companies in the segment. However, the peak streak seems to be over; over $279 billion was wiped off from Nvidia’s stock by Tuesday. Multiple researchers and media houses have explored the reason why Nvidia is falling, and most of them conclude with similar reasons. 

1. AI Demand Cooldown

One of the leading reasons behind the falling trend of semiconductor chipmaker companies throughout August is a global cooldown in AI demand. Nvidia holds the largest market share out of all, with a gross margin of over 71%. While the expertise helped Nvidia soar high, multiple emerging AI startups have cracked semiconductor manufacturing efficiency at lower prices, leading to a sharp cut in the market share.

2. Potential US Economic Slowdown

The manufacturing activity in the US-based industry remained subdued through the week owing to the investor focus shifting to US job figures that are due for release on Friday. The growth concerns have also impacted the Asian and UK markets after the US market witnessed heavy selling. All major tech companies on a volatile spectrum, like Nvidia, have experienced its impact. Along with the job figures, the Federal Reserve will also announce the interest rate cut decision next week, prompting investors to safeguard their money by pulling it out of the market till the decision arrives.

“Nvidia did report results last week where it alluded to a natural and expected deceleration in growth: from having delivered 122% growth in the second quarter, it expects to deliver 80% growth in the third quarter.”

- Shweta Ramachandran (Fund Manager - Artemis Investment Management)

3. A New Antitrust Subpoena

The US Department of Justice had issued a subpoena to Nvidia, requiring the company to submit evidence over antitrust issues. While the news around the subpoena spread early on Wednesday, big bulls and institutional investors may have caught the whiff early, triggering the steep sell-off on Tuesday as well. The Department of Justice has declined to comment on media houses’ requests on the issue.

As global markets face negative charts this week, the final conclusion will appear only after the Federal Reserve's decision next week. This steep fall may also impact the hardware chipmaker's future prospects for running some of the best computer games we know today.