Why is Nvidia's stock decline so important to the markets?

NVIDIA is the second most valuable publicly traded company in the world, making it a mainstay in index funds and retirement savings accounts around the world.

NVIDIA is undoubtedly the most important company for manufacturing artificial intelligence chips in the world, with a market value of $4.2 trillion, coming in second place after Apple, which has a market value of $5.2 trillion, according to FactSet, a company specializing in providing financial data.

NVIDIA represents just over 6% of the S&P 500 Index - the most widely followed index in global stock markets, to which assets worth trillions of dollars are tied. This means that any change in Nvidia's stock price directly affects the retirement and investment accounts of millions of savers in the United States and abroad.

The stock was already under pressure before reports emerged about two extramarital affairs of the company's CEO, Jensen Huang, one of them with a woman who US officials say works for Chinese entities. Nvidia's share price has declined by 6.9% since the beginning of this year until now, compared to the S&P 500 index, which achieved gains of 11.3%, in light of intensifying competition and increasing doubts about the sustainability of the spending boom on artificial intelligence.

Analysts are now wondering what will happen to the company if the board of directors decides to dismiss Huang. Huang has been the driving force behind Nvidia for decades, and it is not clear who might replace him.

Despite the current turmoil, Nvidia's specialized chips mean the company will remain a key pillar of the AI ​​revolution, according to Dan Ives, a veteran technology analyst and partner at investment bank Yorkville Ives.

“Although Jensen is the heart and lung of the Nvidia story, the company and its cutting-edge GPU technologies will continue, and this does not change Nvidia’s well-established position in the chip arms race,” Ives wrote in a note.