Shares in the AI chip designer Nvidia have continued their downward trajectory overnight following reports that US authorities are intensifying their investigation into potential breaches of competition laws by the company.
Nvidia’s shares experienced a 2.4% decline in after-hours trading, compounding a nearly 10% drop during the regular trading session that erased $279bn (£212bn) from its market value. This marked the largest single-day loss ever recorded for a US company. The US Department of Justice has issued subpoenas to Nvidia and other technology firms, mandating the provision of information under legal obligation.
Authorities are reportedly concerned that Nvidia has made it difficult for clients to migrate to alternative semiconductor suppliers and has penalised customers who do not exclusively utilise Nvidia’s AI chips. Such actions suggest an escalation in the US antitrust investigation, potentially leading to a formal complaint being lodged against Nvidia.
The market sell-off on Tuesday was part of a broader downturn triggered by weak US manufacturing data, which has raised investor concerns about the economic outlook. The Institute for Supply Management’s monthly survey indicated a moderate contraction in manufacturing for August, with declines in new orders, production output, and employment levels. As a result, the S&P 500 index fell by over 2%, while the Nasdaq Composite saw a 3.3% decrease. The ripple effects extended to Asia, causing Japan’s Nikkei 225 index to drop by 4.2% and Australia’s S&P/ASX 200 index to decline by 1.9%.
This situation has exacerbated the volatile trading environment for Nvidia and other AI-related stocks, including Google, Apple, and Amazon. Investors are increasingly wary that the tangible benefits and substantial returns promised by the AI revolution may take longer to materialise.
Founded in 1993, Nvidia initially focused on designing chips for video games before capitalising on the cryptocurrency boom by leveraging its processing technologies for mining digital currencies. The company has since pivoted towards artificial intelligence, fuelled by the excitement surrounding the potential of large language models. Despite a 122% rise in second-quarter revenues reported last week, investor sentiment was dampened by signs of slowing growth, particularly concerning Nvidia’s next-generation AI chips, codenamed Blackwell.
A spokesperson for Nvidia stated: “Nvidia wins on merit, as reflected in our benchmark results and value to customers, who can choose whatever solution is best for them.”
The intensified scrutiny from US authorities and the resulting market volatility highlight the challenges Nvidia faces as it navigates the rapidly evolving landscape of artificial intelligence and antitrust regulations. The company’s future performance remains under close observation, with investors keenly awaiting further developments in the ongoing investigation.