Nvidia enters correction territory as stock falls 10% from all-time highs

Chipmaking
giant


Nvidia
entered “correction
territory,”
after
shares
briefly
fell
10%
from
their
most
recent
all-time
closing
high.

Shares
had
recovered
by
Wednesday’s
close
when
they
were
only
about
8%
off
the
high.

The
company,
which
makes
graphics
processing
units
—
or
GPUs
—
has
been
a
key
beneficiary
of
the
artificial
intelligence
boom,
which
boosted
demand
for
its
chips.

Nvidia
GPUs
are
commonly
used
for
compute-intensive
AI
applications,
such
as
OpenAI’s
ChatGPT
AI
chatbot.
Its
server
chips
are
also
a
key
component
of
data
centers.

The
company’s
financial
performance
has
been
on
a
tear
in
the
past
year.
It
reported
a
486%
jump
in
non-GAAP
earnings
per
diluted
share
in
the
December
quarter,
citing
huge
chip
demand,
thanks
to
the
popularity
of
generative
AI
models.

The
stock
has
come
under
pressure
for
the
past
two
weeks,
however.
On
Tuesday
morning,
shares
were
10%
from
their
last
all-time
closing
high
of
$950
apiece,
which
they
hit
on
March
25.
The
stock
closed
at
a
price
of
$853.54
on
Tuesday,
down
2%
for
the
session.

Nvidia’s
shares
closed
up
1.97%
on
Wednesday.

Definitions
of
what
constitutes
a
market
correction
vary,
but
it
is
generally
considered
to
be
a
sustained
drop
of
10%
or
more
from
all-time
highs.

Nvidia
declined
to
comment
on
this
story.

The
exact
reason
for
the
downward
move
hasn’t
been
immediately
clear.
Investors
could
be
taking
profit
on
the
stock,
after
a
wild
gain
of
more
than
200%
for
the
shares
in
the
last
12
months.
And
on
Tuesday,
rival
chipmaker


Intel

unveiled
a
new
AI
chip
called
Gaudi
3,
aimed
at
powering
large
language
models
—
the
cornerstone
technology
behind
generative
AI
tools
like
OpenAI’s
ChatGPT.

Intel
said
the
new
chip
is
over
twice
as
power-efficient
as
Nvidia’s
H100
GPU
—
the
U.S.
chip
giant’s
most
advanced
graphics
card
—
and
can
run
AI
models
1½
times
faster than
Nvidia’s
GPU.

Analysts
at
D.A.
Davidson
said
in
a
research
note
that
they
expect
a “shrinking”
of
the
size
of
AI
models,
including
alternatives
like
Mistral’s
Large model and
Meta’s
LLaMA system,
to
drive
down
demand
for
Nvidia’s
stock
over
time.

“Although
NVDA
(Neutral-rated)
should
deliver
a
spectacular
2024
(and
perhaps
into
2025),
we
continue
to
believe
recent
trends
set
up
a
significant
cyclical
downturn
by
2026,”
D.A.
Davidson
analysts
said
in
the
note
Tuesday.

“A
combination
of
shrinking
models,
more
steady
growth
in
demand,
maturing
hyperscaler
investments,
and
increased
reliance
by
their
largest
customers
on
their
own
chips
do
not
bode
well
for
NVDA’s
out
years.”

—

CNBC’s
Ganesh
Rao
contributed
to
this
report.