Shares of artificial intelligence chip designer Nvidia continued to fall overnight after a report said U.S. authorities were stepping up an investigation into whether the company had violated competition laws.
The company’s shares fell 2.4% in after-hours trading, exacerbating a nearly 10% drop in regular trading that saw its value wiped off $279bn (£212bn) to $2.6tn, marking the biggest one-day drop in history for a US company.
Overnight, the US Justice Department sent subpoenas to Nvidia and other technology companies in a move that will force recipients to provide information under the law, Bloomberg reported.
Officials are said to be concerned that the company has made it difficult for customers to switch to other semiconductor suppliers and is penalizing buyers who refuse to use Nvidia’s artificial intelligence chips exclusively.
The move would signal an escalation of the U.S. antitrust investigation and bring the government one step closer to filing a formal complaint against Nvidia.
Tuesday’s sell-off came amid a broader sell-off in markets triggered by weak U.S. manufacturing data that raised broader concerns about the outlook for the U.S. economy among investors. The Institute for Supply Management’s monthly factory survey showed manufacturing contracted at a moderate pace in August, with new orders, output and employment levels falling.
The S&P 500 fell more than 2%, while the technology-focused Nasdaq Composite lost nearly 3.3%. Fears spread to Asia, where Japan’s Nikkei 225 index fell 4.2% on Wednesday and Australia’s S&P/ASX 200 index fell 1.9%.
This comes on top of a recent bout of trading volatility in Nvidia and other AI-related stocks including Google, Apple and Amazon, with investors concerned that it could take much longer to see the practical impact (and solid returns) of the much-hyped AI revolution.
Nvidia was founded in 1993, primarily designing chips for video games, before spotting an opportunity during the cryptocurrency boom where its processing technologies could be used to mine digital currencies. It has since shifted its focus to artificial intelligence, riding a new wave of enthusiasm for the potential of large language models.
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While it reported a 122% jump in second-quarter revenue last week, investors were spooked by signs of slowing growth, particularly around its next-generation artificial intelligence chips, codenamed Blackwell.
An Nvidia spokesperson said: “Nvidia wins on merit, as reflected in our benchmark results and the value to customers, who can choose the solution that best fits their needs.”