Nvidia, the world’s largest AI chipmaker, has experienced a dramatic $406 billion drop in market value this week, showcasing a level of volatility that surpasses its peers and makes Bitcoin seem stable by comparison.
Over the past two weeks, Nvidia’s stock has plummeted by a fifth, revealing a stark issue for investors: the company’s volatility now dwarfs that of its Magnificent Seven counterparts. Nvidia shares have fluctuated between $90.69 and $131.26 in the last 30 trading days, driving its 30-day realized volatility to approximately 80. This volatility is about four times higher than that of Microsoft Corp., double Bitcoin’s volatility, and surpasses even that of high-profile meme stocks like Donald Trump’s media company and Elon Musk’s Tesla Inc.
The recent sharp decline marks Nvidia’s worst two-week period in two years, exacerbated by a lackluster forecast and problems with its Blackwell chip, which dampened investor enthusiasm. The situation was further compounded by news of a US Justice Department probe and a disappointing sales forecast from Broadcom Inc., affecting the broader chipmaker sector.
Despite this turbulence, Nvidia’s stock has had a stellar year, with a more than 100% increase, adding $1.3 trillion in market value. Wall Street remains optimistic about Nvidia’s long-term prospects, particularly as major customers like Microsoft Corp., Meta Platforms Inc., Alphabet Inc., and Amazon.com Inc., which account for over 40% of Nvidia’s revenue, continue to affirm their spending plans in AI infrastructure.
Nvidia’s recent financial results, which saw revenue more than double and beat expectations, failed to meet the highest forecasts, contributing to investor skepticism about the sustainability of AI spending. This scenario suggests that, while Nvidia and other chipmakers will continue to experience significant volatility, long-term investors might find opportunities amidst the turbulence.
As Rhys Williams, chief strategist at Wayve Capital Management LLC, noted, the current market environment is challenging, but for those with a long-term view, this could be a strategic moment to invest in AI-related stocks.
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