After enjoying a stock market recovery through most of July, Nvidia (NASDAQ: NVDA) took a nosedive late in the month, effectively leaving investors who took the June decline as a buying opportunity flat.
Indeed, if a trader purchased $1,000 worth of NVDA shares one month ago, they would have been acquiring the equity roughly at $194.97. At the latest closing bell, Nvidia stock was changing hands at $196.51, meaning the late June investment would have risen $7.90 to $1,007.90.
If the Tuesday, July 28, pre-market is taken into account, the position would turn into a slight loser given NVDA shares’ press-time price is $194.85 – $0.12 below the Monday, June 29 close.
Why Nvidia stock plunged in late July
Nvidia’s performance through July can largely be attributed to the ongoing concerns regarding the financial health of companies involved with the artificial intelligence (AI) ‘boom.’
Specifically, NVDA stock’s drop coincided with Google’s (NASDAQ: GOOGL) latest earnings report, which showed rising capital expenditures (CapEx) and diminishing margins and led to an immediate investor backlash.
The reaction was driven by the debate over return on investment (ROI) from AI infrastructure, which came into focus in late May as Uber (NYSE: UBER) began questioning the worth of its adoption of the technology, as well as by Microsoft’s (NASDAQ: MSFT) changes to GitHub Copilot pricing.
Subsequent developments have done relatively little to alleviate the situation since, though they could represent the costs of providing AI decreasing, they can also be read as some of the biggest players in the sector making an emergency extension of subsidies to avoid losing customers.
Additionally, Nvidia’s most recent drop came shortly after the blue-chip chipmaker entered a $250 billion data center backstop agreement with OpenAI. The move reignited discussions over circular financing in the AI industry and over the semiconductor giant possibly investing in its own customers so they can afford to remain its customers.
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