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Nvidia\u2019s Jensen Huang is beginning to learn the meaning of the expression \u201cthe higher they rise, the harder the fall\u201d.\u00a0<\/p>\n
After briefly eclipsing Microsoft<\/a> and Apple<\/a> in value last week\u2014and indeed\u00a0entire<\/a>\u00a0European stock markets\u2014the company behind the AI chip boom has experienced the single fastest drawdown in history.\u00a0<\/p>\n Over the past three days, roughly $430 billion in Nvidia\u2019s market cap has been wiped out, which is the biggest three-day value loss for any company in history. If you measure the drop from its intraday peak on Thursday, more than half a trillion dollars have gone up in smoke. That\u2019s almost the entire value of Tesla<\/a> knocked off its shares, which pose larger problems for the overall stock market.<\/p>\n \u201cIf Nvidia corrects pretty hard in the coming months it becomes very difficult for the [S&P 500] to keep rising,\u201d Barry Bannister, chief equity strategist at Stifel Financial<\/a> Corp.,\u00a0told<\/a>\u00a0the\u00a0Financial Times<\/em>.<\/p>\n It hasn\u2019t helped either that the founder and CEO has inadvertently added to the pressure by cashing out himself. Huang\u2019s Rule 10b5-1 trading plan, which automatically executes sales when certain conditions are met, liquidated 720,000 shares worth\u00a0nearly $95 million<\/a>\u00a0this month alone.\u00a0<\/p>\n The timing is unfortunate coming just before Wednesday\u2019s annual shareholder meeting and two weeks after\u00a010-for-1 stock split<\/a>\u00a0that made it easier for retail investors to buy into the company. One indication many amateur traders might be taking profits in Nvidia is a sudden slump in Bitcoin, an asset highly correlated to the retail market since it is largely untouched by institutional investors.<\/p>\n Speaking with Yahoo<\/a> Finance, Harvest Portfolio Management co-CIO Paul Meeks blamed the drop on profit taking and talk of AI data center spending peaking.<\/p>\n \u201cThe key here is to make investors feel comfortable that there is a long runway yet,\u201d he\u00a0told<\/a>\u00a0the program on Monday.\u00a0<\/p>\n First @NVIDIA<\/a> DGX H200 in the world, hand-delivered to OpenAI and dedicated by Jensen “to advance AI, computing, and humanity”: pic.twitter.com\/rEJu7OTNGT<\/a><\/p>\n \u2014 Greg Brockman (@gdb) April 24, 2024<\/a><\/p><\/blockquote>\n While Meeks argued Nvidia still looked cheap compared with Cisco when it surged during the dotcom era on the back of internet infrastructure spending, Nvidia\u2019s stock chart suggested further pressure until the price settled around a support line like the 50-day moving average.<\/p>\n \u201cSo [I\u2019m] comfortable with the fundamentals, not comfortable with the technicals,\u201d he said, adding he once the heavy selling volumes begin petering out, he\u2019s \u201cinclined to go back in\u201d and add to his large position in the share.<\/p>\n The company has not responded to a request by Fortune<\/em> for comment.<\/p>\n Nvidia\u2019s bleeding-edge H100 chips are specially designed for data centers that train neural networks, including the large language models like GPT-4 and other forms of generative AI. One of its\u00a0most prolific buyers<\/a>\u00a0is Elon Musk, who is ordering more chips than he claims his\u00a0company Tesla\u00a0can even install<\/a>\u00a0just to ensure he gets his hands on them faster than any of his tech competitors.<\/p>\n Its best known customer however remains OpenAI, whose ChatGPT creation in November 2022 launched the GenAI\u00a0gold rush<\/a>. In April Huang took the rare step of\u00a0hand delivering<\/a>\u00a0a personally signed DGX server to the company, one that came equipped with the first H200 training chips offering nearly twice the GPU memory of its predecessor.<\/p>\n Nvidia\u2019s position as the undisputed global leader\u2014whose AI training chips are a matter\u00a0of U.S. national security<\/a>\u2014has spawned a rally in its stock price that can only be compared with Tesla\u2019s 2020 pile-on.<\/p>\n On Monday, Deutsche Bank<\/a> illustrated the historic nature of Nvidia\u2019s surge by publishing a chart that compared its market cap to Warren Buffett\u2019s investment holding. \u201cBerkshire Hathaway<\/a> has taken over a century to go from zero to just under $1 trillion,\u201d it wrote. \u201cIt took 30 days for Nvidia to go from $2 trillion to a $3 trillion market cap.\u201d<\/p>\n Part of this insane volatility stems from the challenge of properly valuing the trajectory of future revenue, earnings and cashflow when the company\u2019s fundamentals are all improving at a speed\u00a0no one had anticipated<\/a>, Nvidia included.\u00a0<\/p>\n For now, the share is expected to see a rebound when trading on Tuesday opens, but more short-term pain could in store for Nvidia bulls as Meeks suggested. Another adage well known on Wall Street is \u201cthe trend is your friend\u201d.<\/p>\n<\/div>\n\n
Undisputed leader with Elon Musk and OpenAI as key customers<\/h2>\n
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