Flying Too High? Nvidia’s Record Earnings Erased by Historic $279 Billion Loss

File this one under “be careful what you wish for.”

Courtesy of the artificial intelligence boom, software company Nvidia ascended rapidly to become the dominant supplier of specialized AI chips. For a brief while, it was the most valuable company on the planet. But, ironically, Nvidia may have become a victim of its own success.

Just days after reporting gangbusters earnings for its second quarter, Nvidia saw its stock value take a massive dive on September 3. The price of the company’s shares dropped 9.5% and resulted in a loss of $279 billion. It marked the biggest single day decline ever for a U.S. company.

Although Nvidia’s share price had already slipped close to 10% during regular trading on September 3, it fell further in after-hours trading following a Bloomberg report that the company had received a subpoena from the Department of Justice over antitrust concerns. Reports had previously surfaced in early August that the DOJ was investigating complaints that the company was allegedly “abusing its market dominance” in artificial intelligence chips. According to an article in The Information, the DOJ had reached out to Nvidia’s competitors, including Advanced Micro Devices, to gather information about the complaints. Investigators were reportedly looking into the possibility Nvidia charges its customers higher prices for products if they want to buy AI chips from rivals such as AMD. The DOJ was also investigating whether Nvidia has pressured customers to buy additional products such as cables that connect servers together, The Information reported.

According to Nvidia, however, the media reports were wrong. On September 4, the company denied it had received a subpoena from the DOJ over antitrust concerns.

“We have inquired with the U.S. Department of Justice and have not been subpoenaed,” a Nvidia representative told CNBC. “Nonetheless, we are happy to answer any questions regulators may have about our business.”

Historically, Nvidia has been at the forefront of technology trends – from gaming to crypto mining to AI. In fact, the company’s graphics cards for computer games are “perfect” for handling the computing load AI requires to perform its tasks, according to NBC. Microsoft and Facebook parent Meta now spend more than 40% of their hardware budgets on Nvidia gear.

So, if Nvidia’s AI tech is so awesome and there’s no DOJ investigation into the company, what has the market spooked?

To be sure, Nvidia’s potential regulatory entanglements are indeed cause for worry. Skepticism about the future and success of AI are likely playing a part – investors eventually want to see the capital they allocate to creating products turn into useful solutions, after all. Then there are the fears of a weakening economy weighing down Nvidia’s stock price.

The reality for Nvidia and its investors is that for the foreseeable future, they should probably brace for a bumpy ride. Retail investors remain enamored with the possibilities afforded by emerging technology, while institutional investors appear content for now to cut back on their positions and take the profits they’ve already earned from AI-related plays. Speculative push and pull cut generate significant swings in the stock price as a result.

Of course, turbulence in Nvidia’s stock price undoubtedly beats the alternative: Once the biggest game in town on the chip market, Intel is facing the possibility of being delisted from the Dow Jones Industrial Average after losing more than half of its value this year.