Nvidia’s shares tumbled 9.5% on Tuesday, marking the largest single-day decline in market value for a US company.
The AI heavyweight lost $279 billion in market capitalisation, signaling a significant shift in investor sentiment towards artificial intelligence.
The PHLX chip index plummeted 7.75%, its biggest one-day drop since 2020, as investors grew cautious about emerging AI technology.
ETF strategist at Strategas Securities, Todd Sohn, noted, “Such a massive amount of money has gone to tech and semiconductors in the last 12 months that the trade is completely skewed. Investors are realising that the hype around AI may not be justified by the financials.”
Intel’s stock also fell nearly 9% after reports emerged of a planned restructuring. CEO Pat Gelsinger aims to revamp capital spending and slice off unnecessary businesses at the struggling chipmaker.
Worries about slow payoffs from hefty AI investments have dogged Wall Street’s most valuable companies.
Microsoft and Alphabet shares traded lower following their quarterly reports in July. BlackRock strategists warned, “Investors must consider if companies are making the best use of their balance sheets and capital when assessing AI investments.
“Some recent research has questioned if the revenues from AI alone would eventually justify this wave of capital spending on it.”
Nvidia’s recent losses leave it up 118% from its July record high close, where it had almost tripled in 2024.
The weakness in chip stocks accompanied wide declines on Wall Street, with the Nasdaq dropping 3.3% and the S&P 500 down 2.1%. Investors are increasingly cautious about the tech sector, particularly companies heavily invested in AI.
As the market remains volatile, investors await the Federal Reserve’s interest rate decision on September 18.
The expected 25 basis point cut may not be enough to alleviate concerns about the sustainability of AI investments. One thing is clear: the AI hype is fading, and investors are reassessing their portfolios.
Boluwatife Enome
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