Is the proverbial other shoe dropping for AI, or just its market shares?

After its prolific rise as the most valuable company in the world, Nvidia’s shares fell by 9.5% on the New York Stock Exchange, breaking a record for the biggest single-day decline for a US company.

Optimism appears to be waning for investors waiting to see returns on AI gambles, as the broader markets across Asia and the US tumbled.

The S&P 500 index closed over 2% lower on Tuesday, and Nasdaq, dominated by tech companies, fell by more than 3%.

Alphabet – Google’s parent company – Apple, and Microsoft all saw their shares fall as well, marking a potential stagnation in AI positivity.

Similarly, Intel shared a staggering slide of 7% on Tuesday as it struggles to keep up with its main rival, Nvidia. This fall risks its position in the Dow Jones – a group of 30 prominent shares used to track market success – with analysts saying it may be removed following its near 60% decline in shares this year.

Asian technology firms also suffered, with TSMC, Samsung, Tokyo Electron and SK Hynix falling.

The sharp decline of Nvidia however, should be outshone by its dramatic rise to the top – its shares are still worth nine times more than they were in November 2022, and it beat out Microsoft and Apple as the most valuable company in the world.

Recommended reading

• Nvidia Sets Record for Largest Single-Day Market Value Gain
• AI Chip Race Heats Up As Nvidia Sales Double
• Nvidia Market Value Skyrockets Past Apple to $3tn

However, the tides are changing in the AI race as investors grow impatient and are eager over their returns.

The microchip company lost £279 billion in market capitalisation, indicating that investors are more cautious around AI investments.

Their quarterly forecast which came out a week before failed to meet the inflated expectations of investors. The bar may have been set too high, but Nvidia’s revenue is decelerating.

What may have dealt a major blow to Nvidia’s market share are reports that the US Department of Justice has issued the company a subpoena, potentially over anti-trust allegations, stirring further worries from investors.