Nvidia stock experienced a significant decline on Thursday, dropping 6.9% to $109 per share in afternoon trading. This decrease followed a remarkable 13% increase in share value the previous day. Initially, Nvidia’s stock showed promise. However, it fell alongside major stock indexes after the release of June’s ISM Manufacturing data, which hit its lowest point since November. The weak manufacturing report intensified fears of a potential recession, impacting investor sentiment across the board.
Meta’s AI Investments Offer a Silver Lining
Despite the overall downturn, there was a glimmer of hope for Nvidia Stock from an unexpected source: Meta Platforms. The social media giant, which is one of Nvidia’s major clients, provided an upbeat outlook on artificial intelligence. Meta announced an increase in its capital expenditure guidance for the year to a midpoint of $38.5 billion, up from $37.5 billion previously. A substantial portion of this investment is expected to be directed towards data centers that utilize Nvidia chips.
In a call with analysts, Meta CFO Susan Li highlighted the company’s intention to substantially increase investments in AI infrastructure in the coming year. This move aligns with Meta’s strategic focus on expanding its AI capabilities, which could potentially benefit Nvidia’s business.
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Future AI Models to Demand More Resources
Meta is expected to continue its substantial spending on Nvidia GPUs. During a recent call, Meta CEO Mark Zuckerberg stated that training the company’s next-generation Llama 4 AI model will require ten times the computing resources needed for the Llama 3 model. This is in line with insights from Dario Amodei. He is the CEO of AI startup Anthropic and has noted that each successive AI model demands significantly more computing power. Amodei projected that cutting-edge models could cost around $100 million to develop. Some models might approach $1 billion, while future models could potentially reach between $10 billion and $100 billion by 2027.
Broader Market Trends
In addition to Nvidia’s performance, other semiconductor stocks faced declines. Advanced Micro Devices (AMD) and Broadcom saw drops of 7.6% and 7.3%, respectively, on Thursday. Despite the recent downturn, Nvidia stock shares have surged 136% this year up to Wednesday’s close. This increase significantly outpaces the S&P 500 and Nasdaq Composite, which have risen 16% and 17%, respectively, over the same period.
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