Nvidia's shares plunged over three percent in early trading, totaling over five percent decline for the week, while other AI leaders including Google, Meta, Tesla, and Palantir also fell. Nvidia sells the hardware powering AI growth and its weakness unsettles investors. Analysts cited multiple possible drivers: weak enthusiasm, Coreweave's 38 percent collapse after Q2, a Reuters report about a new China-focused chip, and CEO Jensen Huang's planned sale of 150,000 shares triggered by preset parameters. Nvidia and peers remain well above earlier levels, with Palantir up over 150 percent since April, raising bubble and valuation concerns.
Nvidia is particularly interesting, though, because while those other companies mainly produce software, Nvidia has been making bank by selling the hardware powering the AI industry's explosive ascent. If the AI industry is a gold rush, then Nvidia is selling shovels - and when the shovel seller starts to struggle, everybody gets nervous. Analysts were left perplexed by the selloff, casting around for specific causes.
Nvidia's shares fell after Reuters reported that the firm was working on a new generation AI chip for the Chinese market, which could potentially outperform its H20 workhorse. There are also certain signs of internal shakiness, with CEO Jensen Huang recently 150,000 shares for tens of millions of dollars last week. However, the sale was planned in March, and was triggered by hitting predetermined parameters, such as price and volume.
Could the latest selloff be a market correction, a reality check in light of some sky-high valuations? There has been considerable talk of the AI industry showing signs of a dot com era-style bubble. Even OpenAI CEO Sam Altman himself acknowledged last week that we're in a "phase where investors as a whole are overexcited about AI." How long Nvidia's drop in share price will last remains to be seen.
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