The artificial intelligence (AI) crypto market experienced a sharp decline after the U.S. Department of Justice (DOJ) issued a subpoena to Nvidia Corporation (NASDAQ: NVDA) regarding possible antitrust violations. The news caused widespread concern among investors, leading to a substantial selloff across AI-related cryptocurrencies and semiconductor-related stocks. As a result, the total market capitalization of AI crypto tokens dropped by 7.6%, reducing their overall value to approximately $20 billion. Data from coinmarketcap shows major AI crypto tokens in red.
DOJ Investigation Fuels Investor Anxiety
The DOJ’s investigation into Nvidia revolves around allegations that the tech giant may have been engaging in anticompetitive practices by restricting buyers from switching to other suppliers and penalizing those who do not exclusively use Nvidia’s AI chips. This legal scrutiny not only sent Nvidia’s stock tumbling by over 9% but also sparked fear across the broader tech and AI markets.
Nvidia’s role as a leading player in the AI industry makes invaluable for the sector. The subpoena’s impact was immediate, with major stock indexes like the S&P 500 and Nasdaq Composite experiencing significant losses. The S&P 500, in particular, had its third worst-performing day of 2024, registering a 2.12% decline. Similarly, semiconductor-related stocks, which are closely tied to AI development, also saw a sharp downturn, leading to a loss of over $1 trillion in market value. The biggest stocks such as Microsoft, Apple, Google, Amazon & meta led the drop.
The ripple effect was felt most acutely in the AI crypto tokens market, where investor confidence was already fragile due to ongoing market volatility. The sudden drop in AI crypto tokens underscores the growing anxiety around the stability of AI investments, especially those linked to high-risk, high-reward assets like cryptocurrencies.
AI Tokens Suffer Significant Losses
The impact of the DOJ’s investigation was particularly severe for AI crypto tokens, which have been on a downward trajectory since the news broke. Leading AI-related cryptocurrencies such as NEAR Protocol (NEAR), Render, Internet Computer (ICP), and Artificial Superintelligence Alliance (FET) all saw substantial declines. Bittensor (TAO) was among the hardest hit, recording an 11% drop in value.
This downturn is alarming for investors who have witnessed rapid growth in the AI crypto sector over the past year, largely driven by Nvidia’s rise as a leader in AI technology.
Adding to the bearish sentiment is the broader crypto market’s ongoing struggle. Bitcoin (BTC), the flagship cryptocurrency, fell by over 4% to just under $56,000, contributing to nearly $200 million in forced liquidations of leveraged trading positions. The Bitcoin fear and greed index remains below 30%, indicating that the bears are firmly in control. The bearish outlook extends to other major cryptocurrencies, which have also registered significant losses in recent days.
Future Outlook: Uncertainty Reigns
The broader market outlook remains grim, with further declines expected in the coming weeks as investors continue to retreat from high-risk assets. The anticipated interest rate cut by the Federal Reserve on September 18 could further exacerbate the situation, potentially leading to a “sell-the-news” scenario before any signs of a market rebound appear in the fourth quarter.
The current situation serves as a stark reminder of the volatility and unpredictability inherent in the AI and cryptocurrency markets. As legal and regulatory pressures mount, particularly in the wake of the DOJ’s investigation, investors are likely to remain cautious, seeking safer investment avenues until the market stabilizes.
For those invested in AI crypto tokens, the coming weeks will be crucial. The market’s response to the ongoing investigation and any subsequent developments will likely set the tone for the remainder of the year. In the meantime, the fallout from the Nvidia subpoena continues to cast a long shadow over the AI and cryptocurrency sectors, with investor confidence shaken and market stability far from assured.
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- Source: https://coinweez.com/nvidia-subpoena-tumbles-ai-crypto-tokens-market/
