Nvidia, the world’s leading AI chip maker, sparked a global stock market slump on Wednesday, with indices in Asia, Europe and the US falling.
After such news spread on Tuesday, the US Department of Justice Nvidia issued a subpoena As part of an antitrust investigation, investors sold $279 billion worth of shares — the amount The company’s stock is 9.5 percent. The sale is bad news for Nvidia, and it renews existing concerns about the strength of the AI sector and the US economy more broadly.
That a company was able to have such an impact on global stock prices is a testament to Nvidia’s size and reach. Nvidia is The third most valuable company in the world. Because of its dominance, its success — or failure — could shift the tech-heavy Nasdaq stock index, on which it is listed. And because it’s so encumbered with other tech companies, when it falls, the stocks of its partners like Taiwan Semiconductor Manufacturing Co. also fall, which drags on overseas markets. In the US, Nvidia has ceased sales across the technology industry. Shares of Microsoft, Amazon and Intel were lower as of Wednesday afternoon, although rival Advanced Micro Devices of Nvidia saw gains.
“A big risk is that you have this market concentration, and these names have to be volatile to feed the whole market,” Justin Onuekusi, chief investment officer at investment firm St. James Place, said. told Reuters on Wednesday.
While Nvidia triggered this week’s stock market slump, there were a few other factors that unnerved investors. Recent concerns about China’s slow economy Putting an end to a wide array of businesses, including an oil industry already Struggle with falling prices. Poor production In the United StatesWith some higher prices in that sector, part of the equation as well.
Nvidia’s problems come amid growing uncertainty about AI sector
There is significant concern among investors about whether the US technology sector is headed in the right direction. Questions about whether Nvidia is overvalued and the wisdom of investing so heavily in AI technology have dogged the tech sector for months. Analysts from JPMorgan Asset Management and Blackrock warned earlier this week that huge spending on AI is not justified because the technology has limited applications outside the tech sector.
Companies like Microsoft and Meta have ignored that advice, at best Like 40 percent of their hardware budget — billions of dollars — to accelerate their own AI products in Nvidia products But it has investors worried that tech companies are betting too much on a future that may never come. And if these giant companies make a wrong bet, they can drag the stock market down with them.
“[Tech companies are] All kind of saying, ‘Look, we’re not going in the wrong direction of this. We’re going to invest,” Daniel Newman, CEO of Futurum Group, a global technology research and advisory firm, told Vox. “But I don’t hear for what, or where it provides returns. And I think there is a little hesitation [Wall Street] – People want to know where that return comes from.”
All of this — from worries about China’s economy to the strategies of tech companies — is swirling at a time when Some financial and economic experts warning The US may be at risk of recession. And this week’s mess just happened Anxiety intensified These experts may be right.
What does Nvidia’s slide mean for the economy?
There’s no question that Wednesday’s sell-off is concerning, but whether it tells us anything about the danger of a recession is impossible to say now.
Stock market performance isn’t the only — or even the best — indicator of economic health. Stocks rebounded after a volatile sell-off early last month on news that the Federal Reserve would cut interest rates to make credit cheaper and make it easier for people to make big purchases and businesses to hire and make other investments.
The Fed is expected to cut interest rates by a quarter at its meeting this month, which could help ease some recession fears. But that alone is unlikely to completely dispel those concerns.
Although the United States is not currently in a recession — traditionally defined as two consecutive quarters of negative gross domestic product growth — there is still a concern over high inflation and high interest rates, which could reduce output and lead to high unemployment rates. .
Nvidia’s fall from grace this week probably isn’t a definitive indicator of whether the economy will go into recession, and it may not last that long. But it says something about the market’s dependence on the technology sector — and it’s the latest reminder of how much uncertainty remains about the U.S. economy.
