Nvidia Tanks - 10% Pre-Market Following Chip Delay Shock... (Microsoft, Google, and Meta Affected)

Good morning and happy Monday!

After Friday’s absolute bloodbath in the markets, investors are definitely waking up on a weird side of the bed this morning. With the Dow, S&P 500, and Nasdaq all closing redder than my wife’s favorite Apothic wine at -1.5%, -1.8%, and -2.4%, the weak jobs report and fears of a Fed “hard-landing” have definitely sealed the looming recession worries most had in the back of their minds throughout the market’s summer rally.

(Source: Giphy) 

However, as if the market, investors, and the tech industry weren’t biting their nails hard enough going into Monday’s opening bell, it looks like Nvidia has emerged to be another bad news player amongst the tech giants of our day. Hitting another speed bump – err pothole - on the road to AI glory, Nvidia has announced a massive delay in its highly anticipated Blackwell chips, due to certain design flaws. Translation: Sh$t ain’t workin like it’s supposed to…

(Source: IBD) 

In short, Nvidia is reportedly delaying it’s next generation Blackwell AI chips by at least three dreadful months - with mass shipments being delayed until early 2025. As expected, once rumors of this issue began surfacing amongst investors on Friday, Nvidia tumbled -5.65% on the week settling at $107.27. Meaning this drop officially put Nvidia decisively below its 50-day and 10-week moving averages—basically a double whammy for investors trying to keep their heads above water in what now appears to be a new downtrend forming. 

Which is also, a no bueno for all those degenerate Wall Street Bet’s call options out there, as Nvidia has plummeted -10% during this morning's pre-market trading. 

(Source: Investing.Com)

With that said, the main caveat to this delay is that it’s not just Nvidia’s problem. According to reports, Microsoft, Google, and Meta are also feeling the heat as these companies collectively ordered tens of billions of dollars' worth of these chips to supercharge their AI ambitions. 

(Source: Reuters) 

This obviously adds to the current negative sentiment to Microsoft and Meta since Azure already missed analyst expectations during its most recent earnings (and also dampens Microsoft’s 1.8 Million GPU goals), while Meta’s is woefully dealing with a $4bn money pit with Reality Labs.  

As expected, this has analysts already sounding alarms about a “bubble world” surrounding AI investments. Hedge fund Elliott Management is on the record saying that the hype surrounding AI might not be justified, while Sequoia Capital continues to shout its $600bn question of “Where is all AI revenue going?”.

(Source: Giphy) 

So it’s clear that we may be on the brink of a reality check going forward. As of right now, Nvidia’s price action is in the market’s hands as the three-month delay news is already out. Meaning if Nvidia’s performance dips further, it could be the main igniter that halts this bubble from growing - especially since Goldman Sachs has come out of the woodworks echoing this sentiment with a warning that “AI’s economic impact could now be limited in the coming decade”. 

(Source: Tom’s Hardware) 

Ok so just to be clear, we’re now officially in a bubble? Who knew…

So yeah, this just adds insult to injury within the current landscape as we approach this week's price action. On the other hand though (in an effort to break up the bad news here), you Apple investors are still flying high. Because while Nvidia and Apple have both had a rocky relationship throughout the AI race, Apple has gone unscathed from the delay news simply due to the fact that they’ve relied on Google’s Tensor Processing Units for its AI needs instead of Nvidia’s hardware. For those wondering, this is one of the main reasons why Apple barely closed green on Friday, up +0.69%, while Nvidia, Microsoft, and Meta all dipped.

(Source: The Register) 

So in light of Nvidia not only causing headaches for itself but for Microsoft and Meta, while Apple made one helluva choice by not using Nvidia (hilarious btw), what’s next for the tech space? 

(Source: Giphy) 

Well, as of right now Nvidia is doing more backflips than Simone Biles while conducting new test runs with Taiwan Semiconductor Manufacturing Co. (TSMC), in order to save their next earnings reports. Plus, in addition to trying to solve the design issues, the Justice Department is now breathing down Nvidia’s necks as they probe the tech giant for its AI dominance. 

(Source: Reuters) 

So clearly, it looks like Nvidia’s momentum is stalled for the time being, especially as last week's economic reports gave all us investors “Sleeping under a bridge” fears. Meaning if you’re an Nvidia investor, it may be time to take a page out of Grandpa Warren’s book and reevaluate.

It’s no secret Nvidia has had one hell of a year as the stock has roared 122.69% YTD (up 2,686.23% the past five years), but in simple gravitational laws, what goes up must come down… and this delay could just be the canary in the coal mine for Nvidia going forward. 

(Source: Giphy) 

So if you haven’t already, keep an eye on Nvidia and the tech space in general. This sector has propped up the market’s for quite some time, but now that there are cracks showing… It's got investors and Wall Street all sweating more than a nun in a cucumber field. Meaning, if these AI woes keep up, things could get ugly, like, really fast. Until next time, friends… 

Stocks.News holds positions in Apple, Microsoft, and Google as mentioned in the article.