Nvidia Stock Drops Below $3 Trillion Mark

The Chip Giant Faces Market Fluctuations Amidst AI Boom

iShook Opinion

Jun 6, 2024 - 11:07

Nvidia Stock Drops Below $3 Trillion Mark

Nvidia's stock opened lower on Thursday, bringing its market value below $3 trillion, just a day after reaching this milestone. Despite this dip, the company remains a leader in AI technology, though it faces growing competition.

Nvidia's Stock Dips on Thursday

Nvidia's stock opened lower on Thursday, dropping its market value below $3 trillion. The stock price started the day at $1,240.09 per share after a strong performance on Wednesday, where it closed at $1,224.40, marking a 5% increase.

A Brief Moment at the Top

On Wednesday, Nvidia's stock surge briefly made it the second-most valuable company in the U.S., surpassing Apple. However, the early retreat on Thursday put it back behind Microsoft, which remains the top company. This spike in tech stocks came as softer U.S. economic data and lower Treasury yields fueled hopes that the Federal Reserve might cut interest rates soon.

Leading the AI Revolution

Nvidia has been a major player in the AI industry, especially after OpenAI launched ChatGPT in late 2022. The company’s stock has risen by over 140% this year and 200% over the past year. Over the last five years, Nvidia’s stock has skyrocketed by more than 3,300%, far outpacing the Nasdaq's growth of 14%, 29%, and 126% over similar periods.

Announcement of New AI Chips

Nvidia's stock rally this week was partly due to an announcement by CEO Jensen Huang. At an industry event, Huang revealed that Nvidia will release a powerful new chip, the Blackwell Ultra, in 2025. This will be followed by a new AI chip platform called Rubin in 2026, with an Ultra version of Rubin expected in 2027.

Dominating the Tech Industry

Nvidia is a go-to supplier for AI chips and software for major tech companies like Amazon, Google, Meta, Microsoft, and Tesla. These companies use Nvidia’s hardware to support their AI products and services.

Strong Financial Performance

In the first quarter, Nvidia reported earnings of $6.12 per share on revenue of $26 billion. This was a significant jump from the previous year, with earnings up 461% and revenue up 262%.

Data Center Revenue Soars

Nvidia's Data Center division saw a 427% increase in revenue year-over-year, reaching $22.6 billion and making up 86% of the company’s total revenue. The gaming segment, previously Nvidia's main business, brought in $2.6 billion.

Stock Split and Dividend Increase

Nvidia announced a 10-for-1 stock split set for June 7 and a dividend increase from $0.04 per share to $0.10 per share.

Facing Competition

While Nvidia leads in AI chips, it faces competition from AMD and Intel. AMD plans to release new AI chips in 2024 and 2025, with another platform coming in 2026. Intel is also pushing its Gaudi AI accelerators, which promise lower costs.

Customers Becoming Competitors

Nvidia is also dealing with competition from its own customers. Companies like Amazon, Google, and Microsoft are working to reduce their reliance on Nvidia’s chips to cut costs.