On September 3rd Eastern Time (the first trading day of September), technology stocks in the US stock market plummeted, with chip giant Nvidia dropping as much as 9.5%. On that day, its market value evaporated by $279 billion (approximately RMB 2 trillion), setting a record for the highest single day market value loss in US stock history.
After the market closed, the US Department of Justice issued a subpoena to Nvidia, seeking evidence of the company's violation of antitrust laws. As a result, Nvidia's stock price continued to decline in after hours trading, with a drop of 2.4%.
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In fact, the pressure faced by Nvidia not only comes from the anti-monopoly investigation of the US Department of Justice, but also from rumors in the market that the shipment time of its latest generation of gaming chips may be delayed. This news exacerbates market concerns about supply chain stability and raises doubts among investors about Nvidia's future development.
Under dual pressure, Nvidia's prospects have become increasingly uncertain, but some analysts remain optimistic about the company's prospects, seeing it as a buying opportunity amidst the wave of AI revolution. Daniel Ives, a senior analyst at Wedbush, pointed out in his latest report to Daily Economic News reporters that despite market turbulence caused by macroeconomic uncertainty and the approaching US presidential election, demand in the AI field far exceeds supply, especially for companies represented by Nvidia, which remains the core leader in the industry. Ives predicts that AI capital expenditures will reach $1 trillion in the coming years, and Nvidia's GPU chips have become a key driving force for technological development.
The market value evaporated nearly 2 trillion yuan overnight! Nvidia may face antitrust lawsuit from the US Department of Justice
On September 3rd Eastern Time, Nvidia's stock price opened 2.8% lower than expected, and then continued to decline, closing down 9.5% to $108, the lowest in three weeks since August 9th. On that day, the market value evaporated by $279 billion (approximately RMB 2 trillion), and the total market value shrank to $2.65 trillion. The sharp decline of Nvidia has also driven the decline of other chip stocks such as Intel, Marvel, AMD, and Qualcomm. The VanEck Semiconductor ETF index, which tracks semiconductor stocks, fell 7.5%, marking its largest daily decline since March 2020.
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Analysis suggests that the most direct factor contributing to the market's sharp decline on that day was the poor performance of the latest August economic data released by the United States, which brought enormous pressure to the market. In addition, Nvidia has been continuously declining since the release of its financial report after the market closed on August 28th, and it is also facing growth pressure. Since the release of its financial report, Nvidia's stock price has cumulatively fallen by 14%.
But Nvidia's troubles go far beyond that. After the stock market closed on September 3rd, Nvidia received a subpoena from the US Department of Justice.
According to sources familiar with the investigation cited by foreign media, the US Department of Justice has issued subpoenas to Nvidia and several other companies in an attempt to find evidence of Nvidia's violation of US antitrust laws. Previously, the US Department of Justice had issued a non binding survey questionnaire to seek more information. The issuance of this subpoena marks an escalation of the investigation, as these legally binding documents require recipients to provide specific information indicating that the US government may be preparing to file a formal lawsuit against Nvidia.
US antitrust officials believe that Nvidia may limit market competition by making it more difficult for customers to switch to other suppliers, and may also punish customers who do not fully use its artificial intelligence chips. Some groups complain that Nvidia threatens customers who use both Nvidia and its competitors' chips, forcing them to choose Nvidia.
According to sources, some Nvidia customers are concerned that if their company purchases chips from competitors like AMD, Nvidia may charge them higher chip prices or limit the number of chips sold to them. According to reports, a representative from a competitor of Nvidia has accused the Department of Justice that customers who purchase Nvidia's chips and cables at the same time can obtain lower prices through bundled sales, including the highly sought after H100 chip, while the price of purchasing a single product is higher. Another representative accused Nvidia of limiting the number of chips customers can obtain unless they also purchase additional Nvidia products.
Insiders say that regulatory agencies are conducting corresponding investigations into this matter. Nvidia has now become a crucial link in the global technology giant's supply chain. For example, Microsoft and Meta spend over 40% of their hardware budget on purchasing Nvidia devices. At the peak of the Nvidia H100 chip shortage, the retail price of a single component was as high as $90000.
In addition, the US Department of Justice is also investigating Nvidia's acquisition of Run.ai, announced in April this year. Run.ai focuses on developing AI computing management software that enables AI chips to run more efficiently. Regulatory authorities are concerned that this transaction may further enhance Nvidia's market dominance, making it more difficult for customers to give up using Nvidia's chips.
In response to the antitrust investigation by the US Department of Justice, Nvidia stated, "Nvidia has won the market through the advantages of its own products, which is fully reflected in our benchmark test results and the value that customers receive. Customers can fully choose the most suitable solution according to their own needs
Will game chips based on Blackwell architecture be delayed?
At the same time, unfavorable news has also been reported from Nvidia's chip division.
According to media reports, there are reports from the supply chain that the release date of Nvidia's consumer grade gaming chip GeForce RTX 50 series graphics cards based on the Blackwell architecture will be delayed compared to the original plan due to the need for re production (RTO) to improve yield. However, the specific release time was not mentioned in the news. According to the financial report, the gaming division is Nvidia's second largest division, second only to the data center division.
Nvidia stated during last week's earnings conference call that the company is currently focused on the production of Blackwell data center GPUs. In terms of revenue, this type of product accounts for the majority of Nvidia's total revenue, and the market demand is extremely strong, while TSMC's production capacity may lead to supply bottlenecks.
According to foreign media reports, although TSMC has invested huge amounts of money in expanding production capacity, chip production still requires the construction of factories, which is an extremely complex process and actual production is becoming increasingly difficult. In addition, TSMC not only needs to serve Nvidia, but also chip design companies including Qualcomm, AMD, Intel, etc. In addition, tech giants such as Amazon and Google are also developing their own chips, and the competition for production capacity will become more intense in the future. OpenAI's latest self-developed chip has also been handed over to TSMC for production, and it is expected that the competition for production capacity will intensify in the future.
So the market generally expects that the release of GeForce RTX 50 series graphics cards may be postponed from the fourth quarter to CES 2025. However, it is worth noting that as of now, Nvidia has not announced the release date of this series of graphics cards.
Is it time to buy on dips? Analysts debate fiercely
The successive negative news has put Nvidia, the 'chip giant', in a predicament. However, some analysts remain optimistic about Nvidia, believing that this wave of selling actually provides an opportunity to buy on dips.
Randy Abrams, head of global asset management research at UBS, said, "Investors are now questioning whether investment returns can be realized. When they see some macro data that is not as strong, they are a bit nervous. Therefore, there is a question: whether music continues to play and whether cloud computing investment still exists
Abrams added that weak data is causing panic in AI stocks, but "what we see from supply chains and hyperscale enterprises is that they will continue to spend. This is the reason for buying on dips.
After Nvidia released its financial report, analysts from multinational investment bank Stifel reiterated its "buy" rating and target price of $165 for Nvidia. The modernization of data center computing is still ongoing, and we believe that Nvidia remains the main beneficiary, "the analyst wrote in the report
Wedbush senior analyst Daniel Ives also pointed out in a report to Daily Economic News reporters that although the sell-off of technology stocks in September made some investors feel uneasy, he insists that the bull market logic of technology stocks has not changed, and Nvidia's key role in the AI revolution has not been shaken.
Ives further stated that although technology stocks have recently been under pressure from safe haven sentiment, with the possibility of the Federal Reserve initiating a rate cut cycle and the possibility of a macroeconomic soft landing still present, the spending cycle of artificial intelligence technology has just begun, providing a foundation for the future rise of technology stocks. He believes that technology stocks will continue to rise in 2025.
Bernstein senior analyst Stacy Rasgan stated in an interview with foreign media that Nvidia expects to increase production of its next-generation Blackwell chips in the fourth quarter of this year, which may drive up its stock price.
I think people are a little worried now that Nvidia is a bit stagnant, "Rasgan said." Once Nvidia increases production in the fourth and first quarters and production growth stabilizes, I expect the stock price to rise accordingly
However, there are still some analysts who are cautious about the overall AI market.
Murphy& Paul Nolte, Market Strategist and Senior Wealth Manager at Sylvestment Wealth Management, pointed out that although the huge spending in the AI field is highly anticipated, there is still uncertainty in the return on these investments. He also mentioned that, looking back at the early days of the Internet era, the first winning companies were not always the final winners, so now is not the time to buy AI related stocks on bargain.
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