Nvidia sees 140% year-over-year growth — and is catching up about a quarter a full 17% of the S&P 500’s overall gain. In June, Nvidia had an even larger impact on the index’s returns, accounting for greater than a third of overall returns.
Demand for the company’s AI chips is so high that CEO Jensen Huang admits it is his biggest concern.
Although Nvidia shares may proceed to build up If the Federal Reserve cuts rates of interest this week, any rate hike could also heighten concerns about the AI giant’s undeniable influence on the index and what could occur to the market if demand falls or shifts away from Nvidia’s AI chips.
Nvidia’s Impact in June 2024 Graphic by Visual Capitalist via Getty Images
When Nvidia’s stock price fluctuates, it has a noticeable effect on the broader market; declines in Nvidia’s stock parallel declines in markets as a whole.
For example, the low point earlier this month worn out greater than $10 billion of Nvidia CEO Jensen Huang’s personal wealth in a single day and greater than $279 billion of the company’s total market capitalization. The Nasdaq also fell by 3.3% and the S&P 500 by 2.1% on the day.
And as shares surged greater than 30% in the two weeks ending Aug. 21, Nvidia’s market capitalization rose by $750 billion and lifted the Nasdaq by over 7%.
Nvidia’s share price swings “could impact broader indices like the Nasdaq 100 and S&P 500, given their strong correlation with Nvidia’s stock,” said Lukman Otunuga, senior market analyst at online trading house FXTM Entrepreneur in an email sent ahead of Nvidia’s second-quarter earnings report in August.
Nvidia’s performance has a deeper impact: it affects investors’ perceptions of AI demand as a whole. The 4 firms that account for greater than 40% of Nvidia’s profits are: Amazon, Google, Meta and Microsoft — so if Nvidia’s profits increase, interest in AI elements will even increase among major players.
Nvidia last month reported second-quarter profit of $16.6 billion, beating expectations of $15 billion. It had its fourth quarter in a row triple-digit growth.
The AI chip manufacturer had Market capitalization At the time of writing, its market capitalization was roughly $2.866 trillion, making it the third largest company in the world.