What does a DoJ subpoena mean for U.S. stocks?

The United States stock market sell-off escalated following a subpoena issued by the Department of Justice (DoJ) to semiconductor giant Nvidia (NASDAQ: NVDA). Given Nvidia’s significance in the stock market, its legal woes will likely escalate losses for many equities.

The DoJ issued the subpoena to investigate potential concerns related to Nvidia’s dominance in the artificial intelligence (AI) space.

The government is searching for evidence that the technology giant violated U.S. antitrust laws. This development is widely viewed as indicating that authorities might issue a formal complaint against the chipmaker.

NVDA’s sell-off

In addition to the general market sell-off, Nvidia’s stock decline intensified on September 3, recording one of its biggest single-day losses. The equity wiped out almost $280 billion in a day, struggling to maintain gains above the $100 support zone.

As of press time, Nvidia’s decline continued, with the stock trading at $109, having recorded losses of less than about 14% in the past 24 hours. The news could derail Nvidia’s dominance as the leading chipmaker amidst the growing AI boom. However, the company has emphasized that its competitive edge is based on merit.

NVDA one-week stock price chart. Source: Google Finance

DoJ subpoena impact on stock market

Given Nvidia’s significant role in the stock market, particularly in sustaining gains for indices like the S&P 500, such a legal inquiry could have a spillover effect. If the investigation is prolonged, it could potentially lead to changes in the tech giant’s business model, impacting its revenue growth targets—a factor that could affect the broader technology market.

Overall, the impact of the DoJ’s subpoena on the stock market will depend on how the investigation unfolds. If significant issues are unearthed, resulting regulatory actions from the government could greatly affect Nvidia and other AI giants in terms of market dominance.

Conversely, if the matter is resolved swiftly with minimal consequences, it could ease investor concerns, leading to the stabilization of most equities.

Experts take on Nvidia’s subpoena

Meanwhile, stock market expert Gareth Soloway suggested that the subpoena might not have a significant impact. In an X post on September 4, Soloway noted that other big tech companies have been in similar situations with minimal repercussions.

Additionally, during an interview with Yahoo Finance on September 4, Harvest Portfolio Management CIO Paul Meeks indicated that Nvidia remains the “cleanest name” in the technology sector. 

He pointed out that although the subpoena is a negative development, it might not significantly impact Nvidia. Meeks suggested that investors should focus on technical analysis rather than fundamentals, noting the stock is likely to rebound at $100, which could affect the general market.

In summary, considering other underlying fundamental elements, the subpoena might not be a significant factor amid larger concerns about the economy’s health, fears of a possible recession, and potential interest rate cuts by the Federal Reserve.

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Source: https://finbold.com/what-does-a-doj-subpoena-mean-for-u-s-stocks/