The AI stock market took a historical dip last Monday in what analysts see as the beginning of a new dawn. The world’s most dominant AI chipmaker, NVIDIA’s $278 billion market cap wipeout could change the AI stock market forever. The 9.5% loss on a single day is higher than the market cap for Chevron (CVX) and Adobe. Simply put, this is more than your entire family lineage will ever make especially if they adopt your trading habits of timing the perfect bottom. Stock crashes are normal occurrences. Nonetheless, what makes the Monday experience a brutal bloodshed is that it was the worst-ever market cap dip in history!
Expectations on AI Stock Market Trends
The period leading to the AI stock cap wipeout was characterized by expectations of deceleration. According to Julia Lee at FTSE Russell, “Nvidia did report results last week where it alluded to a natural and expected deceleration in growth: from having delivered 122% growth in the second quarter it expects to deliver 80% growth in the third quarter.”
While many investors would feel like September victims in the share market corridors, there is still some upside here. The shares are still 9 times the price they bought in November 2022. Market watchers have attributed the recent wipeout to two major events:
First, the Department of Justice (DoJ) subpoenaed as part of an antitrust investigation. Given Nvidia’s lion’s share which is 80% in the chip market, claims regarding its role in making it harder for clients to switch to other suppliers are yet to reach a formal complaint level.
Second, the huge crash is associated with the financial bubble that poses a foreseeable risk to investors. Generative artificial intelligence enthusiasts believe that AI is simply driving a capex boom.
Just as we saw with the networking companies, of the internet, AI is driving a major capex boom and threatens to stifle the high rates of returns that have characterized the sector over the past 15 years and which current valuations imply will continue. The Chief Global Equity Strategist, Peter Oppenheimer
With the increased competition, there is an expectation that the high returns and profit margins will begin to drop. Therefore, the insane rates for top companies like Nvidia are likely to decline owing to the technology cycles.
Is Nvidia a buy Sell or hold?
While investors will fix their eyes on 140.76 to clear a proper buy of the shares, there is more to the decisions with the changing mindset. Matt Britzmam, a seasoned analyst pointed out that:
The question of return on investment that many Artificial intelligence investors fall back on, simply isn’t the main consideration for Nvidia’s biggest customers at this stage. Like many before, this cycle won’t be a straight line, but while the ‘build it and they will come’ approach continues, it plays right into Nvidia’s hands.
Nvidia stocks led the AI market in 2023. In 2024, it remained at the top even during its historical dip. Its positive outlook creates the impression that Nvidia will outperform the market in 2024.
Whether the Nvidia and Artificial Intelligence market is a sell, buy or hold is more of a personal conviction. Some view the trends as the peak with possibilities of future disappointments while others believe that the party is yet to begin. Those who have lost huge sums feel like it was their inability to understand the stock market! Who understands the market anyway?
In sum…
The sharp fall in share prices has changed the overall sunny side of the AI stock market forever. Others are rushing to sell their shares while others are seeing a rare opportunity to purchase more shares. Be it as it may, Nvidia’s current chip, hopper is still a force in the market. The next generation, Blackwell has seen considerable delays in production. As always, there are hopes it will do way better than its predecessors. Amidst all these occurrences, the appetite for investors will finally meet the desire for growth of the chipmakers. The curve isn’t going to be smooth. Nonetheless, expectations keep us all going!
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