Nvidia Stock: Navigating Market Volatility After $600B Loss

Nvidia (NVDA) shares plummeted Monday, erasing approximately $589 billion from its market capitalization, marking the largest single-day loss in US corporate history. The sharp decline follows concerns over mounting competition from the Chinese artificial intelligence firm DeepSeek, which released a cutting-edge AI model that runs on less-advanced hardware, potentially reducing demand for Nvidia's high-end graphics processing units (GPUs).



The sell-off was part of a broader tech downturn that saw the Nasdaq Composite fall 3.1%, its worst day since December. Nvidia shares closed at $118.58, marking their most significant drop since March 2020 during the early days of the Covid-19 pandemic. Monday’s plunge also dethroned Nvidia as the world’s most valuable publicly traded company, at $2.9 trillion, pushing it back to third place behind Apple and Microsoft.



The downturn was triggered by DeepSeek’s launch of an open-source R1 model, which the company claims was trained in just two months at a fraction of the cost required by US-based firms like OpenAI. This development has raised questions about the sustainability of high AI-related spending, particularly on Nvidia's GPUs that dominate the AI chip market.

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Nvidia itself described DeepSeek’s innovation as “an excellent AI advancement,” but argued that it expects demand for its chips to increase rather than diminish. “Inference requires significant numbers of Nvidia GPUs and high-performance networking,” a company spokesperson said in a statement on Monday.

Beyond Nvidia, the selloff extended to other tech and semiconductor companies. Broadcom saw its stock drop 17%, wiping out $200 billion in market value. Data center companies heavily reliant on Nvidia’s chips, such as Oracle, Dell, and Super Micro Computer, also experienced sharp declines of at least 8.7%.

Oracle’s chairman, Larry Ellison, saw his net worth fall by $27.6 billion, the most among affected billionaires, according to Forbes. Nvidia CEO Jensen Huang’s personal fortune dropped by $21 billion, ranking as the second-largest personal loss.

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The AI-fueled stock surge of the past two years has made companies like Nvidia central to market confidence. Nvidia’s shares soared 239% in 2023 alone, driven by demand from tech giants like Alphabet, Meta, and Amazon.

Potential legal problems
But Nvidia may face a different set of problems: The government is reportedly investigating it over potential antitrust violations. Much of Tuesday’s sharp decline was because the US Justice Department reportedly sent it a subpoena as part of an antitrust probe, according to Bloomberg. CNN could not independently verify the subpoena, and the Department of Justice declined to comment directly on a potential antitrust investigation.

Nvidia on Wednesday afternoon said it has not received a subpoena from the Justice Department.

“We have inquired with the US Department of Justice and have not been subpoenaed,” an Nvidia spokesperson said in a statement. “Nonetheless, we are happy to answer any questions regulators may have about our business.”

The Biden administration has been going hard after tech titans, launching probes and lobbing charges against Apple, Google and Amazon, among others. It’s unclear whether a Kamala Harris or Donald Trump administration would continue those cases, but both have criticized tech companies for various reasons during their campaigns.

Nvidia lost another 1.7% Wednesday. The Nasdaq Composite, which tanked more than 3% Tuesday, fell 0.3% Wednesday.

Still, AI bulls continue to believe in Nvidia. The stock remains up 118% this year and has a $2.7 trillion market valuation — a close third behind Apple and Microsoft. Huang said last week that demand for its latest “Blackwell” AI chips “far exceeds its supply.” And even as competition grows, demand for Nvidia’s chips is growing, too.

That’s why bulls like Wedbush’s Dan Ives believe Nvidia’s stock decline presents a buying opportunity.

“Nvidia has changed the tech and global landscape as its GPUs have become the new oil and gold in the IT landscape,” Ives said Tuesday in a note to investors. “Nvidia’s stock decline presents a buying opportunity as the company’s fundamentals remain strong and the long-term growth prospects for AI remain robust.”

Investors should keep an eye on Nvidia's stock price levels, as the company navigates market volatility and potential legal issues. While the recent decline has been significant, Nvidia's strong fundamentals and long-term growth prospects may present opportunities for investors willing to weather short-term market fluctuations.