Nvidia Corp., the world’s third-largest company by market value, has made headlines this week with its unprecedented stock market movements. The chipmaker has added a staggering $329 billion in market value, setting a new record for the largest single-day gain, surpassing previous records it set in recent months.
This remarkable surge follows a dramatic 7% drop the previous day, which wiped out more than $193 billion from the company’s market capitalization. The volatility reflects ongoing turbulence in the markets, where Nvidia’s movements are even more pronounced compared to traditionally volatile assets like Bitcoin.
In July alone, Nvidia’s shares have experienced significant fluctuations, accounting for four of the eight largest market cap losses. This volatility is part of a broader trend of investors shifting away from high-growth technology stocks to companies poised to benefit from anticipated Federal Reserve rate cuts.
Nvidia’s stock rallied by 150% in the first half of the year, driven by strong performance and optimistic forecasts for artificial intelligence (AI). However, recent better-than-expected inflation data has fueled speculation about imminent rate cuts by the Federal Reserve, causing investors to reevaluate their positions.
The recent market rotation saw investors taking profits from AI-focused investments and reallocating funds into banks and cyclical companies. This shift accelerated after concerns about Alphabet Inc.’s AI investments raised questions about future profitability. Positive news from Advanced Micro Devices Inc. (AMD), which provided an optimistic forecast related to its AI initiatives, rekindled investor interest in technology stocks. Nvidia’s stock surged further on Wednesday after Federal Reserve Chair Jerome Powell suggested that a rate cut in September was possible.
Matt Maley, Chief Market Strategist at Miller Tabak + Co., noted, “The volatility in Nvidia reflects the current confusion among investors. There are concerns that the massive capital investments in AI may not deliver the anticipated returns.”
The pronounced swings in Nvidia’s stock are driven by both company-specific developments, such as AMD’s performance and Microsoft Corp.’s increased AI infrastructure spending, and broader macroeconomic factors, including Fed rate cut expectations and geopolitical tensions.
Kunjan Sobhani, an analyst at Intelligence, remarked, “Microsoft’s announcement of increased capital spending on cloud and AI strengthens Nvidia’s short-term sales outlook.”
Meta Platforms Inc., another major tech firm investing heavily in AI, is expected to report its results after the market closes on Wednesday. Investors will be looking for indications that Meta can justify its substantial investments more convincingly than Microsoft and Alphabet.
While large tech stocks like Microsoft and Apple Inc. have seen substantial market movements following major developments, Nvidia’s stock is increasingly reflecting broader market sentiments and investor anxieties.
Maley added, “There is concern that the enthusiasm for capital investment might wane, but Nvidia’s strong performance and the fear of missing out (FOMO) continue to drive significant market reactions whenever the stock rebounds after a decline.”
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