chip manufacturing giant Nvidia It has entered “correction territory,” with its stock price currently down 10% from its recent all-time closing high.
The company, which makes graphics processing units (GPUs), has been a major beneficiary of the artificial intelligence boom, which has boosted demand for its chips.
Nvidia GPUs are often used in compute-intensive artificial intelligence applications, such as OpenAI’s ChatGPT AI chatbot. Its server chips are also a key component of data centers.
On March 18, 2024, at the annual Nvidia GTC conference held at the SAP Center in San Jose, California, Nvidia founder and CEO Jensen Huang demonstrated products on the stage.
Josh Adelson | AFP | Getty Images
The company’s financial performance has grown by leaps and bounds over the past year. The company reported a 486% increase in non-GAAP diluted earnings per share in the December quarter, driven by huge demand for chips due to the popularity of generative AI models.
However, the stock has come under pressure over the past two weeks. The stock is down 10% from its all-time closing high of $950 per share on March 25. On Tuesday, the stock closed at $853.54, down 2% on the day.
Nvidia shares were last trading down 0.7% as of 9:45 a.m. ET.
Nvidia’s stock price performance in the past month
Definitions of a market correction vary, but are generally considered to be a sustained decline of 10% or more from an all-time high.
Nvidia declined to comment for this story.
What is the reason for the decline?
The exact cause of the decline is unclear. Investors may be taking profits after the stock surged more than 200% in the past 12 months.On Tuesday, rival chipmakers Intel A new artificial intelligence chip called Gaudi 3 has been launched, designed to provide support for large language models – the cornerstone technology behind generative artificial intelligence tools such as OpenAI’s ChatGPT.
Intel said the new chip is more than twice as energy efficient as the U.S. chip giant’s most advanced graphics card, the Nvidia H100 GPU, and runs AI models 1.5 times faster than Nvidia GPUs.
Analysts at DA Davidson said in a research note that they expect a “shrinking” in the size of artificial intelligence models, including alternatives like Mistral’s large models and Meta’s LLaMA system, to weigh on Nvidia stock over time. need.
DA Davidson analysts said in a report on Tuesday: “While NVDA (neutral rating) should deliver strong results in 2024 and possibly even 2025, we still believe that near-term trends will lead to significant losses in 2026. Cyclical recession.”
“Shrinking model numbers, more steady growth in demand, maturing hyperscale investments, and increasing reliance by its largest customers on their own chips do not bode well for NVDA in the coming years.”
— CNBC’s Ganesh Rao contributed to this report.
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