Nvidia Stock Continues Its Slump Amid Reports of Subpoena from DOJ

Nvidia stock, which fell nearly 9.5% yesterday, is trading lower in early US price action today also after reports that the US Department of Justice (DOJ) has issued a subpoena to the chip designing company.

“Antitrust officials are concerned that Nvidia is making it harder to switch to other suppliers and penalizes buyers that don’t exclusively use its artificial intelligence chips, according to the people, who asked not to be identified because the discussions are private,” reported Bloomberg.

Nvidia has meanwhile defended its business practices and in its emailed response it said that the company “wins on merit, as reflected in our benchmark results and value to customers, who can choose whatever solution is best for them.”

Nvidia Stock Crashed Yesterday

Notably, the crash in Nvidia wiped off $279 billion of its market cap which was a new record, ahead of the $232 billion decline in Meta Platforms’ market cap on February 3, 2022, after it spooked markets with its Q4 2021 earnings.

Nvidia shares have been quite volatile, especially after their earnings release. On July 31, the company’s market cap soared by a record $330 billion which surpassed the previous record of $277 billion rise which it achieved in a single day in February.

Notably, Nvidia stock has looked weak since the company released its fiscal Q2 2025 earnings late last month.

Nvidia’s revenues rose 122% YoY to $30.04 billion in the quarter which was not only well ahead of its guidance but also the $28.7 billion that analysts were expecting. The company’s adjusted per-share earnings of 68 cents also surpassed the 64 cents that markets expected.

The company guided for revenues of $32.5 billion at the midpoint in the current quarter which was ahead of the $31.7 billion that analysts were expecting.

Sales of AI Chips Have Soared

Nvidia’s Data Center Business which sells the artificial intelligence (AI) chips reported revenues of $26.3 billion which were ahead of the $25.24 billion that analysts expected. The segment accounted for 88% of Nvidia’s total sales. While Gaming used to be a significant earnings driver for Nvidia, it now contributes less than 10% of its overall revenues. However, the dynamics have changed due to the AI euphoria which has helped spur the sales of Nvidia’s Data Center segment.

However, the earnings beat and rosy guidance failed to impress investors and the stock crashed following the report.

The stock had run up sharply after bottoming in early August amid the global sell-off and most Wall Street analysts buying the dip. However, despite beating the earnings, Nvidia wasn’t able to beat the high bar that markets have set for the company.

AI Capex

Tech companies have outlined billions of dollars in capex to build their AI infrastructure and if anything, have been raised their guidance. A section of the market has however been apprehensive about the timeline of returns that tech majors will make on their AI capex.

Reacting to an analyst question on similar lines, Nvidia CEO Jensen Huang said during the earnings call, “The people who are investing in NVIDIA infrastructure are getting returns on it right away. It’s the best ROI infrastructure, computing infrastructure investment you can make today.”

Nvidia stock has been flying high amid the ever-growing AI capex. Josh Koren, founder of Musketeer Capital Partners believes that NVDA stock could slide if tech companies decide to cut back their AI capex. Koren said, “I wouldn’t be surprised to see it happen maybe within the next two or three quarters,” while adding that he expects Nvidia stock to fall by 20% when it happens.

Analysts Are Still Bullish on Nvidia Stock

Despite the recent fall, Wall Street analysts continue to be overwhelmingly bullish on Nvidia and today Melius reiterated its “buy” rating on the stock while yesterday, Cantor Fitzgerald reiterated the stock as an overweight.

However, a section of the market is apprehensive about the stock’s valuation and in a note yesterday, Ritholtz Wealth Management’s chief operating officer Nick Maggiulli said, “As impressive as Nvidia’s growth has been, I’m here to tell you that its valuation is out of control.”

He added, “So, if you own lots of Nvidia stock, I will say the same thing that I said to Tesla shareholders back in early 2021—just take the money.”

Notably, Tesla’s market cap peaked at above $1.2 trillion in late 2021 and since then the company’s valuation has been below $1 trillion, even as it remains the world’s most valuable automaker by a wide margin.

As for Nvidia, the company’s revenues and profits have soared multi-fold over the last couple of years amid the strong demand for its AI chips. The company has a near monopoly in that market, something which US regulators are now getting wary about.