NVIDIA Breaks Records By Losing $278 Billion In Market Cap In A Day

NVIDIA recently experienced a significant stock drop, with shares plunging nearly 10%, wiping out $278 billion in market capitalization.

Investors have been scrambling to pinpoint the primary cause behind this sharp decline. Some attributed the decline to the Institute for Supply Management (ISM) manufacturing survey, which revealed a surge in inventories, the largest since the disruptions caused by the pandemic. Others speculated that concerns over NVIDIA’s shrinking profit margins, as it juggles production of its new Blackwell chips alongside its existing Hopper series, may have fueled the sell-off.

As a reminder, during its most recent earnings announcement, NVIDIA projected a gross profit margin of 74.4% for the current quarter, lower than the 76.7% actual margin in the previous quarter and also below the earlier guidance of 74.8%. This drop in margin raised concerns among investors already worried about the company’s financial outlook.

However, the real cause of today’s market turbulence surfaced when Bloomberg reported that the US Department of Justice (DOJ) had issued a formal subpoena to NVIDIA as part of an ongoing antitrust investigation. It appears that a small group of investors may have been aware of this development earlier, possibly driving the stock’s abnormal price movements. This revelation has prompted some to call for a dedicated investigation by the SEC.

This DOJ subpoena follows an agreement in August between the DOJ and the Federal Trade Commission (FTC) to divide the antitrust investigation workload among tech giants, with the DOJ focusing solely on NVIDIA. Meanwhile, the FTC is leading a broader antitrust probe into Microsoft and OpenAI. The DOJ’s investigation into NVIDIA is likely centered on the company’s efforts to establish dominance in the AI sector, which includes not only AI chips like the H100 and the forthcoming GB200 but also software solutions for AI model training and data center optimization services. This aligns with CEO Jensen Huang’s vision of NVIDIA as an “AI factory.”

Specifically, investigators are looking into claims that NVIDIA provides preferential treatment, such as better pricing or supply availability, to customers who exclusively use its AI chips or adopt its complete system solutions. This aligns with Huang’s previous comments that the company prioritizes customers who utilize its products in NVIDIA’s ready-made data centers, a possible strategy to prevent stockpiling. Additionally, the DOJ is probing NVIDIA’s acquisition of RunAI, a company specializing in AI computing software. The concern is that this acquisition could make it harder for customers to switch to non-NVIDIA solutions.

Despite the mounting pressure, NVIDIA is standing its ground, asserting that it “wins on merit” and emphasizing that its customers “are free to choose” the solutions that best meet their needs.