Nvidia is synonymous with the video game industry, particularly the graphics cards that power a ton of gaming computers. The company has such a large share of the market that it has branched out into other areas, including liquid-cooled data centers. And even though Nvidia’s stock broke records on May 14, it quickly lost about $1 trillion in value because investors focused on a different product. Market volatility strikes again!
According to media outlets such as Yahoo! Finance and Bloomberg, while investors were previously interested in GPUs, changed course to focus on memory chips. This shift in market interest fuels Nvidia’s downward spiral in market share. As of this writing, Nvidia’s stock is down about 16% since May. That doesn’t sound like much, but to put things in perspective, the company’s shares are currently valued at the same levels as in 2019, when people were snapping up Nvidia GPUs to power Bitcoin mining operations.
In order to counter this downward trend, analysts expect Nvidia to embark on a potentially aggressive buyback campaign. According to Yahoo! Finance, Nvidia announced that it would repurchase shares with increased dividends ($0.25 per share, up from $0.01 per share), in addition to an $80 billion stock repurchase program. While some people in the stock market are convinced that Nvidia can turn things around, others fear that issues like higher memory costs, increased competition and investor ownership spillover could cause problems in the near future.
Don’t expect this development to impact GPU prices
To the average layman, the stock market is an almost impregnable place that exists outside of reality with its own rules and physical laws. Kind of like your first day at college. What determines when stock prices change and by how much? How do these changes affect product cost? Typically, a business will reduce the cost of its items and services to return to market value, but that might not be possible here.
As previously reported, Nvidia lost approximately $1 trillion in market value due to investor interest in memory. In turn, this new investor focus can be attributed to the current RAM shortage that is driving up the price of many gadgets, including GPUs. Sites like Tom’s Hardware have been monitoring graphics card prices throughout the year, and they’ve all gone up. For the most expensive GPUs, prices have more than doubled – another reason Smart Money is buying the Nvidia RTX 5070 instead of the 5090.
In any other situation, Nvidia would likely be trying to reduce the cost of its GPUs, but the problem that caused Nvidia to lose market share also derailed the company’s product prices in the first place. This isn’t to say that Nvidia won’t sell GPUs or other services at a discount to recoup its losses; don’t expect future Nvidia RTX card prices to match pre-AI bubble prices anytime soon.
