Nvidia continues to put its investors on edge due to its relentless volatility. The company’s stock recently saw an unprecedented one-day drop in market capitalisation to the tune of $279 billion, marking the largest one-day decline in history. Notably, Nvidia’s stock has accounted for eight of the top ten significant one-day market cap decreases and correspondingly, five of the top ten significant increases.
Despite these wild fluctuations, Nvidia’s stock managed to rise by roughly 125% over the course of the year. The reason behind Tuesday’s 9.5% dip remains unclear, with numerous views offered but none satisfactory. Barron’s speculated that investors had spent their long weekend pondering over Nvidia’s earnings report from the previous week. Other theories include the possibility of sector rotation, the traditionally unstable month of September for shares, and the propensity of investors to abandon equities in anticipation of financial data.
However, the exact cause of this historic loss cannot be pinpointed, much like the reasons for previous record-breaking gains remain ambiguous. Put simply, investing in Nvidia inherently comes with a certain level of uncertainty. Despite the surge in share prices being backed by soaring earnings, the company’s skyrocketing growth brings its sustainability into question. Quoting the words of Nobel laureate economist Eugene Fama from a recent Financial Times interview, it appears that investors are gambling on AI’s world dominance and Nvidia’s near monopoly in it, “but who really knows?”
In essence, nobody knows whether Nvidia’s next significant move will be a record-breaking rise or an even more disastrous fall.