Business News Desk – Shares of US chip manufacturing company Nvidia fell nearly 10 per cent on Tuesday. This is the biggest one-day drop in the market value of an American company so far. This has caused a loss of $279 billion (about Rs 23.42 lakh crore) to the company’s market capitalization. The one-term loss in Nvidia’s stock market value was also more than the $232 billion decline of Facebook owner Meta Platforms (Meta). A major reason for this is that investors are becoming more cautious about artificial intelligence (AI) technology. AI had registered a lot of boom in the stock market this year, but now the biggest decline is being seen due to AI. The PHLX Chip Index fell 7.75 per cent, its biggest one-day decline since 2020. Nvidia released quarterly forecasts about AI last Wednesday, which raised new hopes among investors. But now the falling stock market due to AI has created panic among investors. Experts say so much money has been invested in technology and semiconductors in the past 12 months that the market has imploded.
Why is investing in AI becoming a problem?
Intel shares fell nearly 9%. Reuters reported that CEO Pat Gelsinger and key executives suggested eliminating unnecessary business before the company’s board of directors. In recent weeks, Wall Street’s most valuable companies have been facing the problem of slowing earnings due to excessive investment in AI. Shares of Microsoft and Alphabet fell after their quarterly reports in July. “Some recent research has raised questions about whether AI revenue alone will justify this wave of capital expenditures,” BlackRock experts wrote in a client note on Tuesday. When calculating AI capital expenditures by private companies, investors should consider whether they are using their balance sheets and capital appropriately.”
Investors are now looking at the Fed’s decision
Nvidia’s stock managed to reach a new peak in July. The stock has risen nearly threefold so far this year. Wall Street also fell on Tuesday as chip stocks weakened. The Nasdaq fell 3.3%, while the S&P 500 dropped 2.1%. According to the CME’s FedWatch tool, investors expect the Federal Reserve to cut interest rates by 25 basis points in its policy announcement on September 18.
Nvidia CEO suffers huge loss
After this huge drop in Nvidia’s stock, the company’s CEO Jensen Huang’s wealth has also fallen drastically. After a 10% drop in Nvidia’s stock on Tuesday, Huang’s wealth has fallen from $94.9 billion to $10 billion. In 2016, Jensen Huang was first included in the Bloomberg Billionaire Index, after which this is the first time his wealth has fallen so much in a day. Huang is ranked 18th in the list of the world’s richest billionaires. So far this year, his wealth has increased by $51 billion.
