{"id":3122,"date":"2024-09-05T15:00:00","date_gmt":"2024-09-05T15:00:00","guid":{"rendered":"http:\/\/mobiledave.me\/?p=3122"},"modified":"2024-09-11T10:42:34","modified_gmt":"2024-09-11T10:42:34","slug":"why-nvidia-triggered-a-stock-market-freakout","status":"publish","type":"post","link":"http:\/\/mobiledave.me\/index.php\/2024\/09\/05\/why-nvidia-triggered-a-stock-market-freakout\/","title":{"rendered":"Why Nvidia triggered a stock market freakout"},"content":{"rendered":"
\n

\"Jensen

Nvidia CEO Jensen Huang during the Nvidia GTC Artificial Intelligence Conference at SAP Center on March 18, 2024 in San Jose, California. | Justin Sullivan\/Getty Images<\/figcaption><\/figure>\n

Nvidia, the world\u2019s leading AI chip manufacturer, sparked a global stock market downturn Wednesday, with indexes falling in Asia, Europe, and the United States.<\/p>\n

After Bloomberg reported<\/a> on Tuesday that the US Justice Department issued Nvidia a subpoena as part of an antitrust investigation, investors sold $279 billion worth of shares \u2014 amounting to 9.5 percent of the company\u2019s stock<\/a>. On Wednesday, a spokesperson denied<\/a> that the company had received the subpoena, but said Nvidia is \u201chappy to answer any questions regulators may have about our business.\u201d<\/p>\n

Still, the <\/strong>sell-off is bad news for Nvidia, and it renews existing concerns about the strength of the AI sector and the US economy more broadly.\u00a0<\/p>\n

That one company was able to have such an impact on global stock prices is a testament to Nvidia\u2019s size and reach. Nvidia is the third most valuable company in the world<\/a>. Because of its dominance, its success \u2014 or failure \u2014 can shift the tech-heavy Nasdaq stock index, where it is listed. And because it\u2019s so entangled with other tech companies, when it falls, so does the stock of its partners, like Taiwan Semiconductor Manufacturing Company, which pulled down markets overseas. In the US, Nvidia pushed sell-offs throughout the entire tech industry. Microsoft, Amazon, and Intel shares were down as of Wednesday afternoon, though Nvidia competitor Advanced Micro Devices saw gains. <\/p>\n

\u201cOne of the big risks is that you have this market concentration, and all it takes is those names to be volatile, for it to feed through to the entire market,\u201d Justin Onuekwusi, chief investment officer at investment firm St. James’s Place, told Reuters Wednesday<\/a>. <\/p>\n

While Nvidia triggered this week\u2019s stock market slump, there are a few other factors that have investors rattled. Recent concerns about China\u2019s sluggish economy<\/a> are putting a damper on a wide array of businesses, including an oil industry<\/a> already struggling with falling prices<\/a>. Weak manufacturing in the US<\/a>, along with some higher prices in that sector, are part of the equation as well.<\/p>\n

Nvidia\u2019s troubles come amid rising uncertainty about the AI <\/strong>sector<\/h2>\n

Investors have significant concerns about whether the US tech sector is headed in the right direction. Questions about whether Nvidia is overvalued<\/a>, and about the wisdom of investing so heavily in AI technology, have dogged the tech sector for months. Analysts from JPMorgan Asset Management and Blackrock<\/a> cautioned earlier this week that massive spending on AI hasn\u2019t been justified because the technology has limited applications outside the tech sector. <\/p>\n

Companies like Microsoft and Meta have ignored that advice, spending as much as 40 percent of their hardware budgets<\/a> \u2014 tens of billions of dollars \u2014 on Nvidia products to accelerate their own AI products. But that has investors worried that tech companies are betting too much on a future that may never come. And that if these giant companies have made a wrong bet, they may drag the stock market down with them.<\/p>\n

\u201c[Tech companies are] all kind of saying, \u2018Look, we\u2019re not going to be on the wrong side of this. We\u2019re going to invest,\u2019\u201d Daniel Newman, CEO of the Futurum Group, a global technology research and advisory firm, told Vox. \u201cBut I\u2019m not hearing for what, or where this provides the return. And I think there\u2019s a little bit of hesitation on [Wall Street] \u2014 people want to know where that return comes from.\u201d<\/p>\n

All of this \u2014 from concerns about China\u2019s economy to the strategy of tech companies \u2014 is swirling at a time when some financial and economic experts<\/a> are warning the US could be in danger of a recession<\/a>. And this week\u2019s turmoil has only intensified concerns <\/a>that these experts might be right.<\/p>\n

What does Nvidia\u2019s slide mean for the economy?<\/strong><\/h2>\n

There\u2019s no question that Wednesday\u2019s sell-off is concerning, but it\u2019s impossible to say now whether it can tell us anything about the danger of a recession.<\/p>\n

Stock market performance isn\u2019t the only \u2014 or even the best \u2014 indicator of economic health. Stocks rebounded after last month\u2019s early, volatile sell-off thanks to the news that the Federal Reserve would be lowering interest rates, making credit cheaper and hopefully making it easier for people to make big purchases and for businesses to hire and to make other investments. <\/p>\n

The Fed is expected to lower interest rates by a quarter of a point at its meeting this month, which may help ease some recession fears. But that alone isn\u2019t likely to make those concerns go away completely.<\/p>\n

Though the US isn\u2019t currently in a recession \u2014 traditionally defined as negative gross domestic product growth over two successive quarters \u2014 there\u2019s concern that one could still develop because of high inflation and high interest rates, which could curtail production and lead to higher joblessness rates. <\/p>\n

Nvidia\u2019s fall from grace this week probably isn\u2019t the ultimate indicator of whether the economy will go into a recession, and it may not even last that long. But it does say something about the markets\u2019 dependency on the tech sector \u2014\u00a0and it\u2019s only the latest reminder of how much uncertainty remains about the US economy.<\/p>\n

Update, September 5, 11 am: <\/em><\/strong>This story was originally published on September 4 and has been updated to include Nividia\u2019s spokesperson denying the company received a subpoena.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

Nvidia CEO Jensen Huang during the Nvidia GTC Artificial Intelligence Conference at SAP Center on March 18, 2024 in San Jose, California. | Justin Sullivan\/Getty Images Nvidia, the world\u2019s leading AI chip manufacturer, sparked a global stock market downturn Wednesday, with indexes falling in Asia, Europe, and the United States. After Bloomberg reported on Tuesday that the US Justice Department issued Nvidia a subpoena as part of an antitrust investigation, investors sold $279 billion worth of shares \u2014 amounting to 9.5 percent of the company\u2019s stock. On Wednesday, a spokesperson denied that the company had received the subpoena, but said Nvidia is \u201chappy to answer any questions regulators may have about our business.\u201d Still, the sell-off is bad news for Nvidia, and it renews existing concerns about the strength of the AI sector and the US economy more broadly.\u00a0 That one company was able to have such an impact on global stock prices is a testament to Nvidia\u2019s size and reach. Nvidia is the third most valuable company in the world. Because of its dominance, its success \u2014 or failure \u2014 can shift the tech-heavy Nasdaq stock index, where it is listed. And because it\u2019s so entangled with other tech companies, when it falls, so does the stock of its partners, like Taiwan Semiconductor Manufacturing Company, which pulled down markets overseas. In the US, Nvidia pushed sell-offs throughout the entire tech industry. Microsoft, Amazon, and Intel shares were down as of Wednesday afternoon, though Nvidia competitor Advanced Micro Devices saw gains.  \u201cOne of the big risks is that you have this market concentration, and all it takes is those names to be volatile, for it to feed through to the entire market,\u201d Justin Onuekwusi, chief investment officer at investment firm St. James’s Place, told Reuters Wednesday.  While Nvidia triggered this week\u2019s stock market slump, there are a few other factors that have investors rattled. Recent concerns about China\u2019s sluggish economy are putting a damper on a wide array of businesses, including an oil industry already struggling with falling prices. Weak manufacturing in the US, along with some higher prices in that sector, are part of the equation as well. Nvidia\u2019s troubles come amid rising uncertainty about the AI sector Investors have significant concerns about whether the US tech sector is headed in the right direction. Questions about whether Nvidia is overvalued, and about the wisdom of investing so heavily in AI technology, have dogged the tech sector for months. Analysts from JPMorgan Asset Management and Blackrock cautioned earlier this week that massive spending on AI hasn\u2019t been justified because the technology has limited applications outside the tech sector.  Companies like Microsoft and Meta have ignored that advice, spending as much as 40 percent of their hardware budgets \u2014 tens of billions of dollars \u2014 on Nvidia products to accelerate their own AI products. But that has investors worried that tech companies are betting too much on a future that may never come. And that if these giant companies have made a wrong bet, they may drag the stock market down with them. \u201c[Tech companies are] all kind of saying, \u2018Look, we\u2019re not going to be on the wrong side of this. We\u2019re going to invest,\u2019\u201d Daniel Newman, CEO of the Futurum Group, a global technology research and advisory firm, told Vox. \u201cBut I\u2019m not hearing for what, or where this provides the return. And I think there\u2019s a little bit of hesitation on [Wall Street] \u2014 people want to know where that return comes from.\u201d All of this \u2014 from concerns about China\u2019s economy to the strategy of tech companies \u2014 is swirling at a time when some financial and economic experts are warning the US could be in danger of a recession. And this week\u2019s turmoil has only intensified concerns that these experts might be right. What does Nvidia\u2019s slide mean for the economy? There\u2019s no question that Wednesday\u2019s sell-off is concerning, but it\u2019s impossible to say now whether it can tell us anything about the danger of a recession. Stock market performance isn\u2019t the only \u2014 or even the best \u2014 indicator of economic health. Stocks rebounded after last month\u2019s early, volatile sell-off thanks to the news that the Federal Reserve would be lowering interest rates, making credit cheaper and hopefully making it easier for people to make big purchases and for businesses to hire and to make other investments.  The Fed is expected to lower interest rates by a quarter of a point at its meeting this month, which may help ease some recession fears. But that alone isn\u2019t likely to make those concerns go away completely. Though the US isn\u2019t currently in a recession \u2014 traditionally defined as negative gross domestic product growth over two successive quarters \u2014 there\u2019s concern that one could still develop because of high inflation and high interest rates, which could curtail production and lead to higher joblessness rates.  Nvidia\u2019s fall from grace this week probably isn\u2019t the ultimate indicator of whether the economy will go into a recession, and it may not even last that long. But it does say something about the markets\u2019 dependency on the tech sector \u2014\u00a0and it\u2019s only the latest reminder of how much uncertainty remains about the US economy. Update, September 5, 11 am: This story was originally published on September 4 and has been updated to include Nividia\u2019s spokesperson denying the company received a subpoena.<\/p>\n","protected":false},"author":1,"featured_media":3124,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[15],"tags":[],"class_list":["post-3122","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-tech-policy"],"_links":{"self":[{"href":"http:\/\/mobiledave.me\/index.php\/wp-json\/wp\/v2\/posts\/3122"}],"collection":[{"href":"http:\/\/mobiledave.me\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/mobiledave.me\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/mobiledave.me\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/mobiledave.me\/index.php\/wp-json\/wp\/v2\/comments?post=3122"}],"version-history":[{"count":2,"href":"http:\/\/mobiledave.me\/index.php\/wp-json\/wp\/v2\/posts\/3122\/revisions"}],"predecessor-version":[{"id":3125,"href":"http:\/\/mobiledave.me\/index.php\/wp-json\/wp\/v2\/posts\/3122\/revisions\/3125"}],"wp:featuredmedia":[{"embeddable":true,"href":"http:\/\/mobiledave.me\/index.php\/wp-json\/wp\/v2\/media\/3124"}],"wp:attachment":[{"href":"http:\/\/mobiledave.me\/index.php\/wp-json\/wp\/v2\/media?parent=3122"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/mobiledave.me\/index.php\/wp-json\/wp\/v2\/categories?post=3122"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/mobiledave.me\/index.php\/wp-json\/wp\/v2\/tags?post=3122"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}