Nvidia’s Stock Dips: Is This the Beginning of a Steeper Decline?

Nvidia, the titan of the semiconductor industry, has experienced unprecedented growth thanks to the artificial intelligence (AI) boom.

Written by: Arslan Butt • Sunday, August 11, 2024 • 2 min read

• Last updated: Sunday, August 11, 2024

Nvidia, the titan of the semiconductor industry, has experienced unprecedented growth thanks to the artificial intelligence (AI) boom.

As of mid-2024, the company achieved a staggering market capitalization of $3.46 trillion, a remarkable ascent from $360 billion in early 2023.

This surge is largely attributed to Nvidia’s AI graphics processing units (GPUs), which have become indispensable in high-compute enterprise data centres.

According to TechInsights, Nvidia dominated the GPU market in 2023, shipping nearly all units to enterprise data centres.

This dominance allowed Nvidia to significantly raise the price of its top AI-accelerating chip, the H100, leading to a substantial increase in adjusted gross margin to 78.4%.

Stock Split Prediction: 2 Artificial Intelligence (AI) Stocks Will Split After Nvidia, Broadcom, and Super Micro – The Motley Fool

Artificial intelligence (AI) has been a powerful catalyst where the stock market is concerned. Since January 2023, shares of Nvidia, Broadcom, and…

— The Stock Trader Hub (@StockTraderHub) August 11, 2024

Stumbling Blocks on the Path to Success

Despite Nvidia’s impressive performance, vulnerabilities have been revealed in recent weeks. The company, having briefly surpassed tech giants like Microsoft and Apple in market size, faced challenges that questioned its continued dominance.

Most notably, Nvidia announced a delay in the shipment of its highly anticipated Blackwell chip, pushing delivery from late 2024 to early 2025.

This setback, attributed to potential design flaws and capacity constraints at Taiwan Semiconductor Manufacturing (TSMC), marked a significant deviation from Nvidia’s otherwise flawless execution.

This delay has not only dampened investor confidence but also opened opportunities for competitors like AMD, which reported a surge in data centre sales and has a more cost-effective AI GPU, the MI300X.

Historical Trends and Nvidia’s Future Prospects

Historical patterns in tech innovation suggest that no major breakthrough, from the internet to blockchain, has avoided an early-stage bubble. Each has seen market leaders’ values plummet by 80% or more once initial euphoria waned. For Nvidia, the current challenges present a crucial test of its resilience.

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While Nvidia has diversified beyond AI GPUs into gaming and crypto mining, ensuring a buffer against total collapse, the company must navigate the impending market corrections that history predicts.

The delay of the Blackwell chip could be just the first domino to fall, potentially exacerbating a broader sell-off in Nvidia’s stock.

As Nvidia grapples with these immediate hurdles, the broader tech industry watches closely. The outcome of this period could redefine competitiveness in the AI and semiconductor markets and either solidify Nvidia’s position at the top or mark the beginning of a significant downturn.