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It was another miserable day for NVIDIA ( Nasdaq: NVDA ) as the stock fell 7.04% today. After closing at $103.73, the sell-off continued in after-hours trading, with shares of NVIDIA trading hands for little more than $100 per share.
And then something changed rapidly. NVIDIA shares jumped and are now trading for $109 per share in after-hours trading, a 5% jump from where they closed trading today. Let's look at why NVIDIA shares lost so much today and then explore why they're suddenly rebounding so strongly in after-hours trading.
Key Points in This Article
- NVIDIA shares dropped more than 7% today. The losses were primarily attributable to continuing sector rotation out of technology stocks and also fears around the company's competitive position after it was revealed Apple trained their new AI models on Google's TPUs.
- In after-hours trading NVIDIA is rebounding due to positive earnings from rival Advanced Micro Devices ( NYSE: AMD ) and also positive cloud spending comments from Microsoft ( Nasdaq: MSFT ).
- If you're seeing company after company state they're forecasting massive demand for artificial intelligence into 2025 tonight and wondering what stocks could be attractive "buy the dip" ideas, then you'll want to grab a free copy of our " The Next NVIDIA" report. It features a software stock we're confident has 10X potential but is available for a limited time only.
Why NVIDIA Shares Sank 7% Today
NVIDIA shares sank 7% today as technology stocks in general struggled. The Nasdaq-100 fell 1.38%. Each day the Nasdaq falls, the important metric to watch is its relative performance to the Russell 2000. If the Russell 2000 is strongly outperforming, that demonstrates continuing 'sector rotation' of investors moving out of strategies like large technology stocks and into other areas like small caps or value stocks.
The Russell 2000 gained .35% today, so it outperformed the Nasdaq-100 by 1.73 percentage points, a massive divide between the two major indexes.
However, there was company-specific news that also played into NVIDIA's decline today. Apple released a large research paper on the creation of their large language models used in the upcoming release of Apple Intelligence. Here's the relevant section that impacts NVIDIA (emphasis mine):
" The AFM models are pre-trained on v4 and v5p Cloud TPU clusters with the AXLearn framework [Apple, 2023], a JAX [Bradbury et al., 2018] based deep learning library designed for the public cloud. Training is conducted using a combination of tensor, fully-sharded-data-parallel, and sequence parallelism, allowing training to scale to a large number of model parameters and sequence lengths at high utilization. This system allows us to train the AFM models efficiently and scalably, including AFM-on-device, AFM-server, and larger models. AFM-server was trained on 8192 TPUv4 chips provisioned as 8 × 1024 chip slices , where slices are connected together by the data-center network (DCN) [Chowdhery et al., 2022]. Only data-parallelism crosses the slice boundary, other types of state sharding are within-slice only as the within-slice interconnect bandwidth is orders of magnitude higher than the DCN. The sustained model-flop-utilization (MFU) for this training run was approximately 52%. AFM-on-device was trained on one slice of 2048 TPUv5p chips ."
I've bolded the key points you should pay attention to. Specifically, Apple used TPU chips - which are designed by Broadcom ( Nasdaq: AVGO ) - and used in Google Cloud, for training its LLM.
On the surface, a company with the resources and growing AI ambitions of Apple training their model without reference to NVIDIA GPUs is a negative. However, it's worth noting that the computing resources Apple used for training this model are significantly below what companies like Anthropic, OpenAI, xAI, or Meta are using for training their foundational models.
Still, with NVIDIA shares under pressure, investors don't need many excuses to hit the exits right now. While NVIDIA's shares may have shrugged off news like Apple training without NVIDIA GPUs a month ago, investors in the stock are far more skittish today.
Why NVIDIA Rebounded After-Hours
So, why did NVIDIA rapidly rebound after hours? Simply put, there are just lots of positive quotes about AI spending in tonight's earnings reports. I'll review them each one by one.
AMD Earnings
The most important earnings announcement was AMD. The company raised revenue projections for their MI300 chip by $500 million, to $4.5 billion in 2024 sales.
Beyond that, in AMD's earnings call the company noted "we continue to see line of sight to continuing increasing supply as we go through the second half of the year. But I will say that the overall supply chain is tight and will remain tight through 2025. "
Arista Networks Earnings
The networking giant has been seeing booming demand in AI, and in tonight's earnings report topped revenue estimates and issued positive remarks on AI demand. From the company's conference call, "We are confident about second half [of 2024] and we're getting increasingly confident about 2025."
Microsoft Earnings
Finally, Microsoft reported earnings. While the company was initially punished for the results, it has been rising following its earnings call with analysts.
Investors have worried that Microsoft may reduce its significant capital expenditure budgets in 2025, which would show a first weakness in AI spending demand. However, the company increased capital expenditures by 80% in the most recent quarter and affirmed plans to increase its capital expenditures budget in 2025.
Does This End NVIDIA's Slide?
The trillion-dollar question for tech investors is whether tonight's results could mark a 'turning point' in the technology sell-off. After all, several major companies in the AI space all delivered earnings and repeated one after the other that AI demand is staying strong and demand trends for 2025 appear to be in place.
If the Nasdaq outperforms the Russell 2000 tomorrow, that could be a first sign the worst of this sell-off is over.
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