Tech shares dip, AI optimism keeps investors buoyant

Technology stocks fell, but AI optimism remains high, with Nvidia's market capitalization exceeding $4 trillion. The company's new Switch 2 videogame machine uses a rare-earth magnet, highlighting its vulnerability to Chinese supply-chain disruptions. Despite this, traders remain positive about the prospects of AI specialists.

Nvidia's shares jumped more than 2% on Wednesday, pushing the company's market capitalization above $4 trillion for the first time ever. This significant milestone makes Nvidia the first publicly traded company to reach this market value [1].

The surge in Nvidia's stock is driven by the growing demand for artificial intelligence hardware and chips, fueled by the recent boom in generative AI technologies. The company has positioned itself as a leader in creating the graphics processing units that power large language models, such as ChatGPT [1].

Despite geopolitical tensions and ongoing chip curbs that have hampered sales to China, Nvidia's stock has continued to rise. The company's CEO, Jensen Huang, has previously stated that getting blocked from selling chips in China would be a "tremendous loss" for the company [1].

Nvidia's market capitalization has tripled in the past year, outpacing the growth of other U.S. companies with market caps exceeding $3 trillion, such as Microsoft and Apple [2]. The company's stock has surged roughly 74% since its lows in April, when global markets were rattled by a wave of tariffs announced by U.S. President Donald Trump [2].

However, Nvidia's reliance on rare-earth magnets in its latest Switch 2 videogame machine highlights its vulnerability to Chinese supply-chain disruptions. The company's recent earnings call indicated that a recent export restriction on its H20 chips created for China would cost it $8 billion in lost sales [1].

Investors remain optimistic about the prospects of AI specialists, despite the recent downturn in technology stocks. Nvidia's market capitalization now holds the largest weight on the S&P 500 at 7.3%, surpassing other tech giants such as Apple and Microsoft [2].

References:

[1] https://www.cnbc.com/2025/07/09/nvidia-4-trillion.html

[2] https://economymiddleeast.com/news/nvidia-becomes-worlds-first-company-to-reach-4-trillion-market-capitalization/