Nvidia ought to be printing money right now

 

 

With its sales of AI hardware, Nvidia ought to be printing money right now. Rather, Its Stock Is Declining

In a single day, the CEO’s net worth decreased by around $10 billion.

The developer of AI chips, Nvidia, was soaring earlier this year, having achieved a record-breaking valuation of $3.3 trillion.
However, investors began to pose some challenging queries this summer. According to CNN, investors began to lose interest in AI companies due to their exorbitant valuations, and as a result, there was a general lack of confidence, which sent stocks plunging once more.

Given that it is the firm supplying the shovels for the gold rush, Nvidia ought to be flush with profits. Instead, it saw a sharp decline in share price on Tuesday, wiping off a staggering $279 billion from its value.

According to the Bloomberg Billionaires Index, the decline even eliminated around $10 billion from CEO Jensen Huang’s own net worth, his largest one-day decline.

Put another way, even though the company’s income is expanding, something seems wrong.

Is this merely the market reacting to warning signals of an impending slowdown?

Are investors growing more leery of significant bets on mainly unproven technology that is still years away from profitability?

There are several indications that the excitement over AI is beginning to be seriously muted, even though it’s still too soon to determine if Nvidia’s most recent issues are a canary in the AI coal mine.

Greatest Expectations

Tech giants have been pouring billions of dollars into expanding data centers to support insatiable AI models, but aren’t anywhere near seeing a return on their astronomical investments.

To reassure investors, tech CEOs have tried to argue that it’ll all be worth it once AI‘s ambitions are fully realized, eventually. That line of reasoning, though, is clearly testing Wall Street’s patience. Analysts without a deep faith in AI‘s long term value have repeatedly warned that all of that spending may not amount to much of a return in the end.

Thanks to its central position in the AI race, Nvidia’s stumbling shares have had tremendous knock-on effects, with shares of other related companies dropping as well.

Needless to say, there are plenty of other factors at play as well. Nvidia‘s slump on Tuesday was likely also related to rumors of it receiving a subpoena for an escalating antitrust probe by the Department of Justice. (The company denied those reports.)

As of right now, the chipmaker’s missteps are insignificant compared to its explosive growth. Huan is sure that investments are paying off, telling investors last week that “people who are investing in Nvidia infrastructure are getting returns on it right away.” The company’s shares have increased by a whooping 120 percent year to date.

It remains to be seen, though, if it will be sufficient to calm investors who are becoming increasingly optimistic about AI.