 "Nvidia")
The US Department of Justice on Tuesday subpoenaed Nvidia. (Photo: Bloomberg)
Why did investors turn cautious against Nvidia?
In the last three quarters, Nvidia posted revenue growth exceeding 200 per cent. However, last week it reported revenue for the second quarter of the financial year 2024-25 (FY25) ending July 28, 2024, of $30.0 billion, up 15 per cent from the previous quarter and up 122 per cent from a year ago. Experts noted that the revenue outperformance was the smallest relative to expectations in six quarters.
Additionally, Nvidia’s new Blackwell processor lineup, which is set to be a major player in AI technology, is facing manufacturing challenges. Production of Blackwell is set to ramp up in the fourth quarter and continue into the next financial year, Nvidia said last week.
These developments over worries about slow payoffs from hefty AI investments seem to have downplayed the frenzy. With the announcements, the traders had anticipated a potential 9.8 per cent move in Nvidia’s shares. A 9.8 per cent fluctuation would have meant a $305 billion change in market value.
The decline in AI frenzy has also resulted in shares of Microsoft and Alphabet trading lower following their quarterly reports in July.
The US Department of Justice on Tuesday subpoenaed Nvidia as it investigates the company’s antitrust market practices, resulting in further slump in shares.
Investors look out for key US economic data
The broader market selloff was triggered by weak manufacturing sector data, which heightened investor concerns about a potential economic slowdown. As a result, expectations for a 50 basis point Federal Reserve rate cut on September 18 have increased from 30 per cent to 37 per cent.
The market will now focus on labour market data, particularly with attention on Friday’s payrolls report.
First Published: Sep 04 2024 | 4:32 PM IST
