Nvidia’s $100 Billion Swings Become Routine as Volatility Soars
In a rollercoaster ride for investors, Nvidia Corp. experienced a significant rally of 12% following a recent downturn. This surge put the company on track to achieve a remarkable milestone – becoming the first ever to add $300 billion in market value in a single session.
The wild swings in Nvidia’s shares have become a common occurrence, with realized volatility surpassing even the famously turbulent Bitcoin. Throughout July, the stock has faced dramatic declines, leading to four of the eight biggest market cap wipe-outs.
The increased volatility can be attributed to a violent rotation out of high-flying technology shares into more traditional companies expected to benefit from Federal Reserve rate cuts. Nvidia, which had seen a 150% surge in the first half of the year, faced uncertainty as investors shifted focus to sectors beyond tech.
Investors are grappling with concerns surrounding the returns on capital investment in artificial intelligence, especially amid fears that expected profits may take longer to materialize than anticipated.
The recent swings in Nvidia are further influenced by company-specific events, such as Advanced Micro Devices’ positive forecast and Microsoft’s increased spending on AI infrastructure. Macroeconomic news, including speculations on Fed rate cuts and geopolitical tensions, contribute to the market-wide fluctuations affecting even the largest companies like Nvidia.
Despite losing 7% in value on a recent trading day, wiping out over $193 billion, Nvidia managed to regain much of its losses with an impressive $277 billion increase in value by the following day.
Microsoft’s announcement of additional capital spending, driven by cloud and AI needs, has bolstered Nvidia’s revenue outlook in the short term, according to Bloomberg Intelligence analyst Kunjan Sobhani.
As tech giant Meta Platforms Inc. prepares to report its earnings, investors are eager to see if the company can allay concerns surrounding AI investments and demonstrate a more promising return on these substantial financial commitments.
While established tech companies like Microsoft and Apple have seen significant stock movements after key announcements, Nvidia’s sharp fluctuations suggest a higher susceptibility to prevailing market sentiments.
Investors remain cautious about the sustainability of the capital investment narrative but acknowledge Nvidia’s continued growth potential, with the fear of missing out playing a role in the stock’s notable recoveries post-decline.
