What consequences Nvidia's crash has for the AI industry

There was a big sigh of relief on the stock exchanges yesterday, including in Frankfurt. The good news from ARD stock market expert Markus Gürner: "I haven't actually met anyone yet who is talking about a crash or assuming one." And that despite the fact that Nvidia shares fell by almost 15 percent again after the news of Jensen Huang's departure.

"Huang's departure should have shaken the stock market more, but apparently many people expected it," says financial market analyst Kevin Kelly at Yahoo Finance. And over the course of the day, the share price even went up again - losses were almost offset.

"Nvidia's lead lies primarily in its AI programming ecosystem. Chips are becoming interchangeable to a certain extent. Investors are now wondering whether Nvidia's business model will remain and who can lead the company as proactively as Wang in the future."

Close employee takes over CEO position

Jensen Huang wasn't just CEO, he founded Nvidia 33 years ago. He has the expertise when it comes to hardware and has always had a good nose for new directions. First gaming, then cryptocurrency, now artificial intelligence and finally he liked to talk about data centers in space without residents' protests. "At the same time, there was criticism of circular financing and Nvidia's investments. The question is, will this continue and what will become of all the partnerships and financial commitments."

For now, Nvidia has obviously managed to reassure investors to some extent. Collette Kress, a close colleague of Huang's for many years, is taking over the CEO position on an interim basis.

For CNBC floor reporter Jim Cramer, a good choice - with reservations: "Of course there are questions about what she knew about Kimberly Powell and Alicia Wang - about all of this. But she can run the company and explain how it is doing financially, because that will also become an issue. I trust her."

Nvidia relies on a self-reinforcing system

So far, Nvidia is considered one of the biggest, if not the biggest, winners of the AI boom. But Nvidia is partly fueling the demand itself and it goes something like this: Nvidia invests in an AI cloud provider that uses the money to buy Nvidia chips. Nvidia, in turn, buys computing power for its own services. This makes the cloud provider more creditworthy for banks and other investors and raises money for even more data centers, for which Nvidia then supplies chips again.

This self-reinforcing system has already reached its limits, says Bloomberg financial expert Romain Bostick. "The share price has risen explosively, meaning that many institutional investors have reached their upper limit on how large a single share can make up the overall portfolio. So they had to reduce their holdings." The shares of a single company should not and must not completely dominate a fund.

Opportunity for the competition?

If Nvidia no longer invests as usual in the future, then there could be completely different domino effects. Start-ups could lose funding, data centers could become even more expensive and the valuation of AI companies could be revised downwards. Anthropic's IPO next week, for example, will bring in significantly less money than hoped for a month ago.

However, some observers also see an opportunity for competitors such as AMD or Qualcomm, who could fill any gaps with their chips. Their prices have actually increased somewhat, but so far there are no signs that Nvidia could reduce production with Jensen Wang's departure.

There's only one way to avoid risks anyway, says Bloomberg financial market expert John Orthos: "If you forego possible massive profits until the bubble really bursts."