Why is Nvidia stock down? 2 possible reasons for the AI chip company’s slumping share price

Nvidia Corporation has been a Wall Street darling for the past few years. The company has quickly become the AI hardware king, as its powerful chips are critical for running advanced artificial intelligence-powered platforms and services, like ChatGPT. With its newfound status, Nvidia shares (ticker: NVDA) have surged. In the past year alone, NVDA is up over 120%.

But yesterday NVDA stock got hammered. Its share price declined more than 9.5% to $108. For context, shares had been trading above $135 in June of this year.

What exactly is behind Nvidia’s stock price drop yesterday (a drop that cut nearly $300 billion from the company’s market cap)? There are two likely culprits:

Enthusiasm for AI is cooling

First, investors seem to have “softened their optimism” about AI-related stocks recently, notes Reuters. AI technology has upended the tech industry in the past two years, and with its rise, money and investments have flooded into companies operating in the field—leading to rising stock prices for companies benefiting from this boom, such as Nvidia.

While AI doesn’t seem to be a bubble, investors now seem to be worried that it is overhyped—or at the very least that sky-high returns will take longer to materialize than many have hoped. These concerns seem justified considering what Nvidia announced last week during its earnings call: revenue soared 122%, but investors were apparently unhappy with future guidance, even though the company raised it.

In other words, Nvidia says it will continue to grow—just not at the pace investors want to see.

DOJ subpoena?

A second likely reason for Nvidia’s stock price drop is the news from Bloomberg that the U.S. Department of Justice (DOJ) subpoenaed the company, and other companies, for information to see whether Nvidia has violated antitrust laws.

Such subpoenas could be a sign that the DOJ is looking to file an antitrust case against the company over concerns that it is using tactics that make it hard for its customers to switch to other suppliers. Bloomberg‘s report cites anonymous sources.

Reached for comment by Fast Company, a spokesperson for Nvidia said in a statement that “NVIDIA wins on merit, as reflected in our benchmark results and value to customers, who can choose whatever solution is best for them.”

Either way, potential antitrust probes tend to make investors jittery.

As for NVDA stock this morning, shares are slumping again, though not by as much as yesterday. As of the time of this writing, NVDA shares were down 1.9% in premarket trading.

It’s also important to note that much of the market is down since Tuesday’s opening bell. The Nasdaq Composite fell more than 3% yesterday, in part because investors are growing more anxious about the state of the U.S. economy.