{"id":127281,"date":"2024-09-04T04:38:04","date_gmt":"2024-09-04T04:38:04","guid":{"rendered":"https:\/\/news.talkwithrattan.com\/index.php\/2024\/09\/04\/nvidia-suffers-record-279-billion-rout-as-ai-worry-sinks-stocks-times-of-india\/"},"modified":"2024-09-04T04:38:04","modified_gmt":"2024-09-04T04:38:04","slug":"nvidia-suffers-record-279-billion-rout-as-ai-worry-sinks-stocks-times-of-india","status":"publish","type":"post","link":"https:\/\/news.talkwithrattan.com\/index.php\/2024\/09\/04\/nvidia-suffers-record-279-billion-rout-as-ai-worry-sinks-stocks-times-of-india\/","title":{"rendered":"Nvidia suffers record $279 billion rout as AI worry sinks stocks – Times of India"},"content":{"rendered":"
\"Nvidia<\/div>\n
Four weeks after US stocks buckled amid a global flight from risk assets, chipmakers touched off another bout of equities selling when a pair of industry analysts rekindled worries that the mania surrounding artificial intelligence had gone too far.
Nvidia Corp shares tumbled 9.5%, wiping out $278.9 billion in the biggest loss of value ever for a US stock.It is now down 14% in the three sessions since it reported earnings that failed to live up to lofty expectations. All 30 members of the Philadelphia Semiconductor Index sank at least 5.4%, with On Semiconductor, KLA Corp and Monolithic Power Systems Inc down more than 9%. The Nasdaq 100 sank almost 3.2%.
Nvidia<\/a> shares lost another 2% in late trading after the US Justice Department sent subpoenas to it and other companies as it seeks evidence that the chipmaker violated antitrust laws.
There were other reasons for the bleak start to what is historically a volatile month for stocks. Worries about China\u2019s growth shook commodities markets from oil to copper. US manufacturing data came in light and showed an uptick in prices paid, a potentially worrying sign for inflation hawks. But most catalyzing for the tech rout were the fresh warnings that AI\u2019s promise to rewire global economies was far from being realized, making it hard to justify lofty valuations.
That was the gist of views expressed in separate commentaries from JPMorgan Asset Management and BlackRock Investment Institute. Michael Cembalest, chairman of market and investment strategy at JPAM, warned that spending on AI won\u2019t be justified unless demand for AI services from companies outside of tech starts to increase. For Jean Boivin head of BlackRock Investment, \u201cpatience is needed\u201d before AI takes off, a process of \u201cyears, not quarters.\u201d
Those warnings, of course, aren\u2019t new. Alphabet Inc shares got hit in July after it reported a spike in AI spending with no promise of a commensurate bump in profits, prompting a rotation out of big tech. But the two latest cautions landed in a market that rallied to just short of records in late August, largely on the promise that the US economy won\u2019t crater before the Federal Reserve delivers rate cuts later this month.
\u201cAre we actually going to stick this soft landing, or are we going to get some type of a report later this week that shows unemployment is starting to rise substantially?\u201d said Brian Mulberry, client portfolio manager at Zacks Investment Management. \u201cThat\u2019s where you\u2019re starting to see a lot of this volatility coincide, and it\u2019s just hitting the most overvalued sectors first, and people are starting to look for actual earnings growth, real revenues on the balance sheet. And more importantly than anything, really stable forward guidance.\u201d
The Cboe Voalitlity Index jumped above 20 as the S&P 500 dropped more than 2%, with all but two sectors lower. Like in early August, the selloff spread to other assets. Oil sank 4% and Treasury yields dropped as investors sought havens.
The damage done in the chip sector was extensive, with the Philadelphia semiconductor index dropping the most since March 2020. Intel Corp, whose shares are the second-worst performing in the Philadelphia semiconductor index this year, fell 8.8%. Chip equipment maker Applied Materials Inc fell 7%. Taiwan Semiconductor Manufacturing Co., the world\u2019s biggest contract manufacturer of chips, dropped roughly the same.
Alphabet, Microsoft Corp and Apple Inc lost at least 1.9% as the pain spread to the biggest tech companies looking to reshape the economy with AI.
\u201cOutside of the big tech companies buying among themselves, we haven\u2019t really seen AI spread out across the economy,\u201d Paul Nolte, market strategist and senior wealth manager at Murphy & Sylvest Wealth Management, said. \u201cThere\u2019s still a big question about the ROI from all this spending. And if you go back to the dot-com era, the first winners of the internet weren\u2019t always the final winners. We\u2019re not yet at a place, in terms of valuations, where I\u2019d want to buy this dip.\u201d
While the August 5 market rout rattled investors around the globe, equities bounced back almost immediately, adding more than 5% through the end of the month. Nvidia itself was among the leaders of that rebound, but as the Fed signaled unequivocally that it intends to cut rates, the rally was especially broad.
The near-term calendar promises some key economic data releases, especially Friday\u2019s US payrolls report, that will solidify bets on the Fed\u2019s path. But traders will have to wait three weeks for confirmation.
\u201cWith equities sharply off the August lows as we enter a well-known period of weak seasonality, and with the first rate cut widely expected and arguably already priced in, it\u2019s not too surprising to see some de-risking as investors await more data\/clarity,\u201d Christopher Jacobson, co-head of derivative strategy at Susquehanna International Group. <\/div>\n