Tech giant Nvidia has suffered the worst ever drop in market cap in a single day, with $415 billion wiped from the chip manufacturer on Tuesday.

Nvidia, which produces high-end graphics processing units that power AI in a range of devices, suffered a 9.5 per cent drop in its stock price on the Nasdaq in a single day.

This equated to a loss of $415 billion ($US278.9 billion) in just one day, the equivalent of nearly the entire market cap of Netflix ($433 billion) and more than the market cap of Nestlé ($414 billion).

The drop came after multiple industry analysts raised concerns that the potential of AI had been overhyped and over-valued.

Nvidia, as one of the driving forces providing the tech needed for the AI revolution, suffered from these forecasts significantly.

The majority of the massive drop also came before the US Department of Justice announced that it had subpoenaed Nvidia for information as part of its antitrust investigation into the tech giant.

Brief time at the top

Nvidia is a three-decades old company that pivoted towards AI in recent years, and now provides its AI-powered chips to a range of companies, including Apple and Microsoft.

In June this year, Nvidia briefly became the world’s most valuable company with its market cap hitting $5 trillion ($US3.335 trillion) and surpassing Microsoft’s value.

In the last five days, however, Nvidia’s shares have dropped by 13.6 per cent, leaving its market cap at $3.955 trillion ($US2.65 trillion) as of Wednesday.

This makes Nvidia now the third most valuable company in the world in terms of market cap, behind fellow tech giants Apple ($US3.39 trillion) and Microsoft ($US3.04 trillion).

The stock fall was precipitated by multiple experts issuing concerns that AI was not yet living up to the lofty expectations surrounding it.

JPMorgan Asset Management chair of market and investment strategy Michael Cembalest said that the spending on AI had not been justified yet as there was not adequate interest from non-tech firms.

“Within the next two years, corporate AI adoption trends…need to move higher to avoid a ‘metaverse’ outcome for all the capital deployed,” Cembalest said in a report.

BlackRock Investment’s Jean Boivin also issued a guidance saying that “patience is needed” on AI and that its growth is a matter of “years, not quarters”.

Coupled with Nvidia financial results which revealed a drop in growth from 122 per cent in the second quarter to a forecasted 80 per cent in the third quarter, it led to widespread investor concerns and sell-offs.

The quarterly results, released last week, revealed 15 per cent quarter-on-quarter growth in revenue, up to $44.7 ($US30 billion).

For the third quarter, the company predicted revenue of $48.5 billion ($US32.5 billion), an increase of 8.5 per cent.

Overall the Nasdaq suffered a horror day on Tuesday US time, with a 3.3 per cent drop across the board.

Bad week gets worse

On Tuesday Bloomberg revealed that the US Department of Justice had issued subpoenas to Nvidia as part of its ongoing antitrust investigation into the tech company’s dominance in the computer chips market.

The US Department of Justice had earlier sent questionnaires to Nvidia as part of this investigation but has now sent legally binding orders requiring the firm to hand over information.

The investigation relates to claims that Nvidia has made it difficult for its customers to change to a competing company.

“Nvidia wins on merit, as reflected in our benchmark results and value to customers, who can choose whatever solution is best for them,” a Nvidia spokesperson said.

Nvidia was founded 30 years ago on the 30th birthday of its founder Jensen Huang.

There has been skyrocketing demand for its high-end chips thanks to the huge hype around AI and generative AI.