Nvidia records the worst day in stock history, is this the end?

To be clear, Nvidia is not a company on the verge of bankruptcy. It’s still the third most valuable company in the world, above Google and Amazon. What happened is the company grew too fast and now it’s reached a point where it can’t maintain the same rate of expansion. Unless something very extraordinary happens.

Still, it’s a big deal what happened to the company last Tuesday as the company endured the largest single-day loss of market value in stock market history. Shares of the AI chip giant tumbled 9.5%, erasing a staggering $279 billion from its market capitalization. The previous record was held by Meta which lost $240 billion in a single day in 2022.

To put it into perspective, only 27 companies worldwide have a total value that matches what Nvidia lost in a single day. CEO Jensen Huang, the largest individual shareholder of Nvidia, personally lost $10 billion due to the dip.

Decline Since June Peak

Nvidia’s stock has been in freefall since reaching its peak in June when its market value exceeded $3.3 trillion—making it the highest-valued public company at the time. Since then, the company has lost more than 20% of its value, raising concern among investors on the sustainability of the AI boom. Much of the company’s valuation had been tied to its leadership in AI chips, particularly its high-powered GPUs that have become crucial for AI infrastructure.

The sell-off also coincides with broader declines in other AI and semiconductor stocks. Microsoft, which has heavily invested in AI technologies, has seen its stock drop by 12% from recent peaks, while Taiwan Semiconductor Manufacturing Company (TSMC), Nvidia’s key chip supplier, has plunged 18% since mid-July.

Legal Concerns Add Fuel to the Fire

On top of economic worries, Nvidia is reportedly facing potential legal challenges. The U.S. Department of Justice (DOJ) is rumored to be investigating Nvidia for antitrust violations, adding further pressure on the company’s stock. According to Bloomberg, Nvidia was served with a subpoena as part of the investigation, although Nvidia has denied receiving any formal legal request.

In a statement, a Nvidia spokesperson said, "We have inquired with the US Department of Justice and have not been subpoenaed. Nonetheless, we are happy to answer any questions regulators may have about our business."

The Biden administration has been actively probing major tech firms, launching antitrust investigations into companies like Apple, Google, and Amazon. It remains uncertain whether the next U.S. administration will continue this aggressive stance toward tech giants, but Nvidia’s potential legal challenges have added to the nervousness surrounding the stock.

Investor Confidence Shaken, But Bulls Remain Optimistic

Nvidia’s stock dropped another 1.7% on Wednesday following Tuesday’s dramatic decline, while the Nasdaq Composite, which fell more than 3% on Tuesday, dipped by 0.3%. Despite the sell-off, some bullish investors remain confident in Nvidia’s long-term prospects.

Wedbush analyst Dan Ives emphasized Nvidia’s dominant position in the AI hardware space, stating, "Nvidia has changed the tech and global landscape as its GPUs have become the new oil and gold in the IT landscape." Ives believes that the current dip presents a buying opportunity for those with a long-term investment horizon.

CEO Jensen Huang, while acknowledging the challenges, remains optimistic about the future. He highlighted the high demand for Nvidia’s next-generation Blackwell AI chips, stating that demand "far exceeds its supply." Nvidia’s advanced graphics processing units (GPUs) have become critical for AI applications across industries, from autonomous vehicles to cloud computing.