Major U.S. indexes recorded their worst day since early August, with the S&P 500 plummeting 2.1% and the Nasdaq Composite crashing 3.3%. The Dow Jones Industrial Average, meanwhile, lost a staggering 626 points, or 1.5%.

Now, after seemingly rushing back from the Labor Day holiday, traders were met with disheartening data that reignited fears about the manufacturing sector. Is this just another example of the Biden-Harris administration’s failure to manage the economy effectively? The benchmark 10-year U.S. Treasury yield fell to 3.843%, down from 3.910% on Friday, signaling a lack of confidence among investors.

“We have faded this growth scare perhaps too soon,” said Arun Sai, senior multiasset strategist at Pictet Asset Management. But one has to wonder: are we really just being overly optimistic, or is there something more sinister at play here?

Investors had been riding high on nearly two years of double-digit gains for the S&P 500, but this recent downturn exposes the market’s vulnerability to sudden reversals. While the surging market has created millionaires and boosted many Americans’ net worth, it has also left stocks looking alarmingly overpriced. Companies in the S&P 500 are trading at about 21 times their projected earnings over the next 12 months, well above the 10-year average of roughly 18, according to FactSet.

Even with Tuesday’s decline, the S&P 500 is still up 16% for the year. However, it’s worth noting that the index hasn’t experienced a correction—a pullback of 10% or more from a recent high—since last October. Is this a sign of impending doom?

Data released on Tuesday revealed that U.S. factories are grappling with ongoing weakness in demand. The ISM’s purchasing managers’ index came in lower than expected for August and remains in contraction. S&P Global’s PMI also stayed in contraction, while construction spending data showed a larger-than-anticipated decline. With Friday’s monthly jobs report looming—a key reading that could dictate the Federal Reserve’s next moves—investors are left to wonder if the Fed’s actions are coming too late to avert a recession.

“The story’s not written yet,” said Josh Jamner, investment strategy analyst at ClearBridge. But can we really trust that the Fed will act in time to save us from a downturn?

The Fed is widely expected to initiate its first interest-rate cut later this month. Chair Jerome Powell has made it clear that “the Fed intends to act to stave off a further weakening of the U.S. labor market.” But with the current economic climate, one has to question whether these measures will be enough.

Tech stocks were hit particularly hard on Tuesday, with Nvidia shares plummeting 9.5%. This catastrophic drop resulted in a staggering $279 billion loss in market value—the largest one-day decline in market cap for a U.S. company on record. Despite this, Nvidia is still up 118% for the year. Other chip stocks followed suit, with the PHLX Semiconductor Index down 7.8%.

Boeing also faced a rough day, with shares falling 7.3% after Wells Fargo downgraded the stock, knocking off about 84 points from the Dow industrials index.

In a rare twist, traditional defensive plays—those stocks investors typically flock to during economic uncertainty—managed to shine. Consumer staples and real estate stocks saw gains, but can they really be trusted to hold the market together?

In the commodity markets, fears of dwindling demand from China sent oil prices tumbling. Front-month Brent crude futures dropped 4.9% to $73.75 a barrel, marking its lowest value of the year. Copper prices also fell, dragging down shares of mining and energy companies.

Overseas, Japan’s yen appreciated against the dollar, but will this be enough to offset the turmoil brewing in the U.S. markets? As we navigate these turbulent waters, one thing is clear: the stakes are high, and the future remains uncertain.

Perhaps now is a good time to move wealth or retirement to physical precious metals.

The U.S. has imposed stringent export controls on advanced chips, particularly Nvidia’s powerful H100 chips, aiming to curb technological advancements in China that could have military applications. However, the demand for these chips in China remains high, leading to innovative solutions like those provided by Derek Aw, a former bitcoin miner turned entrepreneur. Aw has facilitated the setup of AI servers equipped with Nvidia chips in locations like Australia, serving Chinese companies remotely.

Aw’s approach involves setting up data centers overseas, like the one in Brisbane, Australia, where over 300 servers were installed to process AI tasks for a Beijing-based company. This method leverages the concept of renting computing power, a practice not new but made more complex by the need for anonymity due to U.S. regulations.

The transactions are often anonymized through smart contracts on blockchain platforms, where identities are concealed by cryptographic keys, and payments are made in cryptocurrencies. This setup allows Chinese companies to operate under the radar, sometimes through subsidiaries in countries like Singapore, further distancing themselves from direct U.S. oversight.

The decentralized GPU model has gained traction, especially after the cryptocurrency mining boom waned, freeing up computing resources worldwide. Platforms like io.net boast of providing unrestricted access to GPU power without the usual customer verification processes, appealing to Chinese entities looking to maintain privacy while accessing technology.

Joseph Tse, formerly with a Shanghai AI startup, highlighted the shift to these decentralized services after traditional cloud providers like Amazon Web Services became inaccessible due to U.S. restrictions. These platforms, while offering a workaround, come with risks like potential data breaches due to the inherent vulnerabilities in blockchain systems.

At industry events, such as one in Singapore, companies are openly marketing these decentralized GPU services, indicating a growing market for such solutions among Chinese developers who need less intensive computing power for smaller AI applications. However, for large-scale AI training, like that required for models similar to ChatGPT, these decentralized setups fall short, prompting efforts to create larger, more centralized computing clusters.

Edge Matrix Computing (EMC) is one example of a company expanding its network to include thousands of GPUs, including those under U.S. export controls, for more robust AI training capabilities. EMC and similar ventures are exploring bulk purchasing of chips like Nvidia’s H100, aiming to reduce costs for intensive AI computing.

The U.S. government, aware of these developments, is tightening its oversight. Senator John Kennedy has expressed concerns over the effectiveness of current export controls, urging stricter measures. The Commerce Department, in response, has been monitoring and attempting to clamp down on these illicit procurement networks.

Meanwhile, entrepreneurs like Aw continue to expand their operations, planning new clusters with the latest chip technologies, legally operating under the guise of foreign subsidiaries. This cat-and-mouse game between regulatory enforcement and technological circumvention highlights the complex landscape of international tech trade and the ongoing battle over technological supremacy.

Article generated from corporate media reports.

(DCNF)—American technology company Nvidia has shot up in value over the last several years following speculation about the potential economic impact of new computing technology that some investors believe could increase productivity substantially.

Nvidia posted huge year-end quarterly profits Tuesday evening, up 265% from a year prior as the company continues to grow at breakneck speeds, according to the company’s fourth quarter results. The fourth quarter gain beat expectations and led to a $277 billion stock rally on Wednesday, up 16.3% in just the day, making it the largest single-day increase in the New York Stock Exchange’s history, according to Reuters.

Investor hype around Nvidia is due to its stake in the semiconductor market, where it commands a vast majority of market share in artificial intelligence (AI) related technologies, experts told the Daily Caller News Foundation. Many investors predict that AI and greater computing efficiency will be a boon to businesses, which could greatly increase productivity using the technology for a wide array of applications.

“Nvidia has already made strides in increased efficiency, which is a tremendous advantage in this regard due to the sheer volume of calculations that must be performed to make a technology like AI possible,” E.J. Antoni, a research fellow at the Heritage Foundation’s Grover M. Hermann Center for the Federal Budget, told the DCNF. “With the ability to position data centers virtually anywhere, size is not really a major issue anymore for chips, but efficiency is due to increased energy prices and environmental regulations. Being on the cutting edge of chip technology puts a firm in a position to truly command the market.”

Nvidia was first founded in 1993, introducing products related to 3D graphics, particularly for gaming and multimedia creation, and later invented the graphics processing unit in 1999, taking a big step for computing power, according to the company’s website. The company also claims to have sparked the era of modern AI in 2012, way ahead of trends around the technology, giving it a commanding lead on other technology companies that are now looking to catch up and expand into AI.

“Nvidia controls most (about four-fifths) of the chip market for AI-related technologies,” Antoni told the DCNF. “The explosion of demand around AI has boosted chip demand too, leading to growth forecasts for Nvidia that were completely off the table just a couple years ago. Like all stock prices, no one can say for sure if Nvidia’s current popularity is warranted because stock prices are speculation on future earnings, and the future is by definition uncertain. This is particularly true for AI, where so much of the potential is unknown.”

Nvidia’s stock price has exploded over the past few years, measuring less than $40 a share at the start of 2019, peaking at over $310 a share in November 2021, before sliding to around $127 a share in October 2022, ultimately climbing all the way to around $800 a share in February 2024, according to MarketWatch.

Nvidia breaks stock market record with a $247 billion one-day market cap surge, as reported by Bloomberg.

Renowned for AI & fast computing, #Nvidia hits a major financial milestone with its staggering revenue.

Stock up nearly 280% in the past year!#AI #Crypto #Stocks pic.twitter.com/Qv9aQ3LP14

— Christiaan (@ChristiaanDefi) February 23, 2024

“The fact that the demand for these products is growing indicates to me that our society, these companies, educational organizations, all the different users of AI believe that there is great value here that can improve our lives,” David Inserra, a fellow for free expression and technology at the Cato Institute, told the DCNF. “I can’t predict that it will certainly be that way. But every indicator that we have indicates that the market is saying there’s great value here. I think that we’d be foolish to ignore that important market indicator.”

Generative AI powered by the type of technology Nvidia is leading the way on is already finding several applications in business despite being in its infancy, including in customer service, cybersecurity, personal assistants, inventory management, accounting and more, according to Forbes. The U.S. is also looking to use semiconductor technology and AI in military applications and is trying to prevent China’s access to the equipment to maintain a technological and militaristic edge.

American companies controlled around 48% of the market share in the semiconductor market in 2022, compared to 7% in China, according to Statista. South Korea controlled the second-largest market share with 19%, followed by Japan and the European Union at 9%.

The Biden administration has placed a number of restrictions on the semiconductor industry to ensure continued American supremacy, including putting sanctions on several Chinese chip manufacturers in October 2022 to prevent them from working with American firms. Congress has also approved $39 billion in direct funding for chip manufacturers as part of the August 2022 Chip and Science Act.

The rollout of the funds has so far failed to bring a substantial number of chip manufacturing plants into operation, with several companies pushing back new plant completion dates to 2025 or later due to volatility in chip prices and government funding uncertainty.

The growth of generative AI powered by new chips has also led to concerns that the technology is being given a liberal skew, such as Google’s AI chatbot Gemini taking a nuanced position on the terrorist organization Hamas’ stance on the violent eradication of Israel and whether China is committing genocide against the Uyghur people.

Nvidia is part of what has been dubbed the Magnificent Seven Stocks, which are stocks that have delivered a large portion of stock growth in the past few years, according to Yahoo Finance. Tesla, an electric vehicle (EV) company, has had a similar meteoric rise starting slightly earlier but has since remained relatively stagnant in 2024 as other competitors in the EV field emerge, raising concerns that Nvidia might not live up to expectations.

“This is always the market dynamic, right? If someone comes along and delivers a more desirable product, well then yeah, sure,” Inserra told the DCNF about the potential for Nvidia to lose its current investor hype. “Right now we’re talking a lot about AI, but what if a new kind of AI, a better type or even more advanced, better type of technology emerges and uses different kinds of computing power? We don’t know what the future of innovation could bring. So to that extent, yeah, it’s possible that Nvidia isn’t going to be the golden child of this forever, but from what I’ve read, it seems like they have been forward-leaning and looking for ways to move into new spaces in the use of their processors for AI, and so right now they have that leg up.”

Nvidia declined to comment to the DCNF.

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