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Why is NVIDIA Corp (NVDA) Stock down?
Nvidia Corp (NVDA) stock plunged by 10.00% as Super Micro Computer's lack of a preliminary earnings report led to a sector-wide sell-off. Super Micro's failure to report preliminary revenue raised concerns about its upcoming results, causing Nvidia and other AI stocks to tumble.
- Market Reaction: The sell-off in AI stocks, including Nvidia, reflects a shift in sentiment after months of rapid growth. Nvidia's market cap had exceeded $2 trillion earlier this year, driven by strong performance and enthusiasm for AI technology. However, the recent downturn highlights the impact of negative news on stock prices, especially for stocks that have seen significant gains.
- Potential Bubble Concerns: The sell-off suggests that much of the gains in AI stocks were driven by sentiment and fear of missing out (FOMO) on the AI boom. When stocks have experienced substantial gains, as Nvidia and Super Micro have, even minor negative news can trigger profit-taking and a broader sell-off.
- Outlook for Nvidia: While the observation that drove the sell-off may not be significant, Nvidia's stock is still affected by sentiment in the AI sector. As a close partner of Super Micro, Nvidia could be influenced by Super Micro's results. However, Nvidia's larger size means it may not be as sensitive to Super Micro's performance.
Shares of Nvidia (NVDA) dropped by 4.68% from $460.95 to $439.38 in the trading on Tuesday, October 17, 2023. The reason why NVDA stock down is due to new U.S. export restrictions on artificial intelligence technology to China. These stricter rules prohibit the sale of Nvidia's H800 and A800 chips, which were allowed under the previous regulations. The U.S. aims to control access to computing power, citing concerns about potential military uses. Nvidia expects a long-term sales impact, despite no immediate material effect on its financial performance.
Following the release of information by Google on Wednesday regarding one of its artificial intelligence supercomputers, which is reported to be faster and more efficient than competing Nvidia systems, shares of the chipmaker slid about 3%. This development comes as power-hungry machine learning models continue to be the most sought-after technology in the industry.
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