Nvidia Stock Plummets 9.5% Amid DOJ Antitrust Probe and Market Turmoil

Nvidia (NVDA) experienced a significant decline of 9.53%.

On Tuesday, September 3rd, after a harsh drop, Nvidia faced additional challenges as the U.S. government intensified its anti-monopoly investigations into the company. Sources revealed that the Department of Justice (DOJ) issued subpoenas to Nvidia and several third-party companies seeking evidence of antitrust violations. The concern is that Nvidia may be making it harder for customers to switch to other AI computing suppliers, and those not exclusively using its AI chips might be penalized. This development indicates an escalation in the investigation by U.S. regulators into Nvidia's alleged monopolistic practices in the computing services market.

After this news broke, Nvidia's stock further declined, with after-hours trading seeing a dip exceeding 2%. On the same day, Nvidia's shares closed down by 9.5%, reaching their lowest since August 9th. This depreciation resulted in a one-day market value loss of approximately $278.9 billion, setting a new record for the largest single-day market cap drop for a U.S. stock, previously held by Meta in February 2022 with a $232 billion loss.

Neither the DOJ nor Nvidia's representatives commented on the recent developments. However, these moves reflect over a year of increasing regulatory scrutiny in the AI sector by the U.S. government.

Months ago, reports surfaced about a DOJ-FTC agreement to continue probing Nvidia, Microsoft, and OpenAI's dominance in AI. The DOJ leads the investigation into Nvidia's potential antitrust violations as a chip manufacturing giant.

In the wake of Nvidia's tumbling stock price, the Philadelphia Semiconductor Index dropped 7.8%, marking a three-week low and influencing a broader market decline. Competitors like Intel fell close to 9%, AMD dropped 8%, and Taiwan Semiconductor Manufacturing Company (TSMC) saw a 6.5% decrease. This pessimistic trend indicates broader concerns about the manufacturing sector and looming employment reports.

Market analysts pointed out that the decline mirrored a wider market downturn, exacerbated by fears of an economic slowdown in the U.S. following underwhelming manufacturing data. Equities like Nvidia have been under scrutiny since its recent earnings report, which, despite solid results, failed to meet exceptionally high market expectations. Investors are now questioning the sustainability of massive AI hardware investments.

Despite recent setbacks, many analysts maintain a "buy" rating on Nvidia, advocating for a promising long-term outlook. For instance, Elon Musk highlighted the robust demand for Nvidia's chips, noting that his AI startup, xAI, utilizes a significant number of Nvidia GPUs, underscoring the continued relevance and demand for Nvidia’s products in large AI applications.

Nvidia's recent stock performance reflects the challenges in sustaining high expectations amidst market volatility and regulatory pressures. However, the company continues to stand strong in a competitive AI landscape, with its long-term prospects remaining viable and attractive to investors.