Nvidia H100 chips are still highly sought after in the tech industry, but the company’s stock has plummeted by 20% since June 18. This decline wiped out over $780 billion from Nvidia’s market capitalization, equivalent to the value of Tesla or Eli Lilly. Despite a brief relief rally, the gains may be short-lived as sentiment remains fragile.
The weakness is attributed to a sector rotation rather than any underlying issues with Nvidia’s fundamentals. The company sells graphic processors for training neural networks and its most advanced chips are in high demand.
However, concerns have grown that major cloud-computing providers and other megacap companies investing heavily in AI may not see a sufficient return on their investments. Microsoft recently predicted slower revenue growth in its Azure cloud business, while Tesla’s struggles with autonomous driving have raised questions about its ability to justify the costs of its AI training efforts.
Elon Musk has discussed his plans to develop custom silicon for vision-based machine learning and rent out spare training compute to third parties. If successful, this could pose a threat to Nvidia’s dominance in the market.
Despite the decline, Nvidia remains one of the most valuable companies in the world, having more than doubled its value since January. However, it is far from the heights reached earlier this year when it surpassed Apple and Microsoft to become the largest company in the world.
Source: https://fortune.com/2024/07/31/nvidia-tesla-stock-correction-bear-market-chipmakers-semiconductors-tsmc-genai/