On July 27, 2024 (New York local time), NVIDIA Corporation (NVDA), a leading artificial intelligence semiconductor stock, closed sharply lower amid concerns about a slowdown in memory semiconductor business. NVIDIA's closing price on the day fell 4.99% from the previous day to $196.51, creating anxiety on Wall Street. Analysts believe that the joint weakness of memory semiconductor companies has been holding back NVIDIA's performance.
NVIDIA Corporation (NVDA) stock plunged by -$10.33 (-4.99%) on July 27 (local time), closing at $196.51. This contrasts with the Dow Jones Industrial Average closing higher on the back of declining international oil prices, suggesting that specific concerns related to NVIDIA as an individual stock and the related industry sector have driven the price decline. In particular, major memory semiconductor company Sandisk plunged more than 11% due to concerns about weakness in the memory market, which is interpreted as having a directly negative impact on NVIDIA's stock price. Given that NVIDIA heavily relies on cutting-edge memory technologies such as high-bandwidth memory (HBM), which is essential for manufacturing high-performance AI chips, the overall weakness in the memory semiconductor market has heightened investor caution regarding NVIDIA's profitability and growth potential.
NVIDIA has continued efforts to strengthen its leadership in the AI field by investing in artificial intelligence startups recently. In fact, NVIDIA demonstrated its commitment to long-term AI ecosystem expansion by investing in Ilya Sutskever's AI startup, but this positive news proved insufficient to prevent the stock's decline that day. This shows that the market is currently more sensitive to short-term industry conditions and macroeconomic variables than to NVIDIA's future growth potential. Some analysts have raised concerns that valuation burdens are increasing following the steep surge in AI-related stocks, and debates over the valuation of AI-based companies such as NVIDIA and Snowflake are intensifying.
Wall Street has noted that NVIDIA's stock has commanded a high premium as a pioneer in the artificial intelligence revolution, but ongoing concerns about overvaluation due to rapid gains in a short period have been consistently raised. Along with observations that current price levels have already priced in all foreseeable positive scenarios, a conservative view is growing that the stock could react sensitively to unexpected minor negative developments. This perspective is also reflected in reports from major investment banks. An investment bank official stated, "NVIDIA's innovation capability and market dominance are beyond question, but the current stock price assumes near-perfect earnings and macroeconomic conditions," and warned that "if macro variables such as uncertainty in the memory semiconductor market and the possibility of interest rate hikes come to the fore, short-term volatility expansion is inevitable." Additionally, geopolitical risks such as intensifying US-China technology competition continue to serve as a burden to global semiconductor companies including NVIDIA.