Nvidia's $400 billion crash this week makes Bitcoin seem calm

(Bloomberg) — Nvidia Corp. shed more than $400 billion in value this week, weighing on major stock indexes as nervousness grows over the health of the U.S. economy and potentially overextended AI trading.

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The world's largest artificial intelligence chipmaker has lost a fifth of its value in the past two weeks. The losses also highlight a more pressing problem for investors in the $2.5 trillion giant: its volatility now dwarfs that of the other “Magnificent Seven,” making Bitcoin seem like a haven of calm.

Nvidia shares have fluctuated between $90.69 and $131.26 over the past 30 trading days, with a record drop in value on Tuesday. That swing pushed the realized volatility over the past 30 days to 80 — more than four times that of Microsoft Corp., twice the value of bitcoin and more than meme stocks like Donald Trump's media company and Elon Musk's Tesla Inc.

The plunge has sent the stock to its worst two-week performance in two years, according to data compiled by Bloomberg. The declines came after a cautious forecast and problems with the Blackwell chip dampened investor euphoria. Then came news that the U.S. Justice Department had issued subpoenas as part of an escalating antitrust investigation. The general mood for chipmakers was further boosted by Broadcom Inc. issuing a disappointing revenue forecast.

“We're in a very difficult market environment right now,” said Rhys Williams, chief strategist at Wayve Capital Management LLC, adding that AI trading is still in its infancy. Still, “day to day, it's anyone's guess as to where the bottom is.”

Rewarding year

Of course, the stock has rewarded investors handsomely this year despite the recent decline. Shares are still up more than 100% this year, adding about $1.3 trillion to its market value. And Wall Street generally believes Nvidia remains well positioned as companies build out their AI-related infrastructure, a process that is expected to continue for at least several more quarters.

Nvidia's biggest customers — notably Microsoft Corp., Meta Platforms Inc., Alphabet Inc. and Amazon.com Inc., which together account for more than 40 percent of Nvidia's revenue, according to data compiled by Bloomberg — have reiterated their spending plans in recent quarters.

Nvidia's results last week confirmed that rosy outlook. Revenue more than doubled and came in better than expected, as did adjusted profit. The company also issued revenue guidance that beat analyst consensus, though it missed the upper estimates.

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This result disappointed market participants accustomed to underwhelming reports. It also heightened concerns among those skeptical about the long-term prospects for investing in AI.

All of this means that volatility in Nvidia and other chipmakers' stocks is likely to continue as investors digest the evolution of the AI ​​theme. For asset managers looking to invest for the long term, this could present an opportunity.

“For a long-term investor, this is a good time to start trying,” said Wayve Capital's Williams. “If someone gave me new money today, I would be excited to add some AI-related stocks.”

– With support from Ryan Vlastelica.

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