Nvidia's stall is in trouble!
On June 6th, it was reported that federal regulatory agencies in the United States have reached an agreement to conduct antitrust investigations against Microsoft, Open AI, and Nvidia over their dominant positions in the artificial intelligence industry.
On June 6th local time, Nvidia's stock price briefly collapsed, dropping about 6% from its peak. As of the close, Nvidia's stock price fell 1.18% to $1209.98 per share, with a market value returning to below $3 trillion. The market value evaporated overnight by about $35.5 billion (approximately RMB 257 billion), and continued to decline after hours. Its market value was immediately overtaken by Apple just one day after it surpassed Apple.
Nvidia under investigation by the US Department of Justice
According to multiple US media reports on June 6th local time, the Federal Trade Commission (FTC) and the Department of Justice will conduct antitrust investigations against Microsoft, Open AI, and Nvidia to examine their influence in the artificial intelligence industry. The New York Times first reported on this investigation, and a person familiar with the situation confirmed with CNBC that the investigation did indeed exist.
According to sources, the FTC will lead the investigation into Microsoft and Open AI, while the Department of Justice will focus on Nvidia, with the investigation focusing on the company's behavior rather than merger and acquisition activities.
According to reports, two sources revealed that the US Department of Justice and the Federal Trade Commission reached an agreement in the past week and are expected to be finalized in the coming days.
This agreement means that the US Department of Justice and the Federal Trade Commission are strengthening their scrutiny of artificial intelligence. For a period of time, Nvidia, Microsoft, and Open AI have largely avoided the impact of regulatory scrutiny by the US government, but this situation has begun to change.
"In the field of artificial intelligence, we need to identify potential problems from the beginning, rather than correcting deeply ingrained problems many years later," said Lena Khan, Chairman of the Federal Trade Commission in February this year.
It is understood that Nvidia is currently the main independent GPU (graphics processor) manufacturer, and GPU is currently the most important artificial intelligence chip. Taking the Chinese market as an example, according to data from market consulting firm IDC, the market size of acceleration chips in China reached nearly 1.4 million in 2023, with GPU cards accounting for 85% of the market share.
It is reported that the news of the upcoming antitrust investigation came a few days after a group of current and former Open AI employees released an open letter on Tuesday, expressing concerns about the rapid development of the AI industry. Despite a lack of supervision, they did not provide whistleblower protection for those willing to speak up.
"AI companies have a strong financial motivation to avoid effective supervision, and we do not believe that a customized corporate governance structure is enough to change this," employees wrote, adding that the company "currently has only a weak obligation to share a portion of this information with the government and no obligation to civil society. We do not believe that they can all be trusted to voluntarily share."
As of now, Open AI has not responded to requests for comment. Microsoft and Nvidia declined to comment.
240 billion yuan short cap
Can Huang Renxun challenge the "world's richest man"?
Driven by the surge in demand for artificial intelligence technology, Nvidia, which dominates the field of artificial intelligence chips, is highly sought after. In order for technology companies to catch up with the trend in big model competition, they must build powerful computing facilities, and AI chips are becoming a bottleneck.
The Financial Times reported that the development speed of artificial intelligence has been affected by the bottleneck period of microchip supply, and the microchips produced by Nvidia are crucial for training and running artificial intelligence models. It is estimated that Nvidia AI chips currently account for 70% to 80% of global sales in this field.
According to the financial report, Nvidia's total revenue in the first quarter was $26 billion, a year-on-year increase of 262%. On May 22nd, Nvidia once again released an optimistic performance forecast, predicting a revenue of $28 billion in the second quarter. Deutsche Presse-Agentur reported that Nvidia's new chip system is expected to remain in short supply in the second half of the year.
And this has also driven Nvidia's stock price to soar. According to Wind data, Nvidia's stock price has risen by over 230% in the past 2023, and has risen by 130.01% so far this year. On Wednesday (5th) of this week, Nvidia surged over 5%, once again reaching a new historical high. Its market value has also exceeded $3 trillion, surpassing Apple and becoming the second highest company in the world in terms of market value, second only to Microsoft.
Wall Street investment banks unanimously believe that the demand for Nvidia's AI chips by tech giants, as well as Nvidia's constantly updated product lines and CUDA architecture, have built a moat and maintained a solid leading position.
Bank of America strategists wrote in a report, "Nvidia has the best ability to drive AI services in the $3 trillion IT industry. Although competitors such as AMD and Intel claim to have the ability to provide AI services, we believe Nvidia still leads for many years in terms of performance, channels, scale, and developer support."
Vivek Arya, senior semiconductor analyst at the bank, added that he believes the stock will dominate the computer market in the next 10 years. Ayra stated that this is because the IT industry has gone through a "decades long cycle of infrastructure upgrades", and the market is witnessing the beginning of the next decade cycle. He said in an interview, "We believe that annual spending may be between $250 billion and $500 billion, and Nvidia is leading this trend."
Since OpenAI released ChatGPT and triggered the AI arms race, Nvidia's stock price has been rising strongly in the past 18 months. Nvidia's chips are actually the only choice in providing power for artificial intelligence models that attract the attention of consumers and Wall Street investors.
Michael Kirkbride, Partner and Portfolio Manager at Evercore Wealth Management, recently stated that the only factor preventing Nvidia from expanding sales is supply not keeping up. He said that Nvidia's reputation as a major client and the growing demand in other industries make its valuation "very reasonable".
Nvidia's stock will begin a 1:10 split after US market hours on Friday and will be traded at the adjusted price starting next Monday (June 10th). Analysts believe that this measure may become a catalyst for further gains, as lower stock prices help attract more attention from retail investors.
With Nvidia's stock price repeatedly reaching historic highs, Huang Renxun's personal wealth has also reached new heights. As of May 24th, Huang Renxun's net asset value reached $91.3 billion, ranking 17th on the global billionaire list. Previously, it was widely expected that 61 year old Huang Renxun could surpass Tesla CEO Musk and become the world's richest person by 2025 at the earliest. However, this antitrust investigation may have an impact on his path to becoming the richest man.
Although bearish predictions about Nvidia are rare, some analysts doubt whether the company can maintain its rapid growth momentum. Analysts warn that Nvidia's stock price may ultimately face a significant decline due to weakened GPU market demand and intensified competition.
According to a report released by S3 Partners on Thursday, the size of open short bets on Nvidia has reached approximately $34 billion (approximately RMB 246 billion), almost equivalent to the sum of Apple and Tesla, which rank second in short positions. According to S3 data, the current open short bet on Apple is about $19 billion, and the bet on Tesla is about $18 billion.