Nvidia shares drop amid TurboQuant fears and lawsuit pressure
Nvidia shares fell about 4% Thursday as investors reacted to competitive, legal and regulatory challenges facing the AI chip leader. Google unveiled TurboQuant this week, an algorithm that cuts AI memory use by up to six times and boosts H100 inference speed by eight times without accuracy loss. Set for presentation at ICLR 2026 in Brazil next month, the technology sparked concerns that software efficiency gains could reduce demand for high-end AI chips and memory products.
TurboQuant compresses the key-value cache in large language models to extreme levels down to 3 bits, with tests on open-source models like Gemma and Mistral showing no downstream quality drop. The announcement hit memory chip makers hard: Micron, Western Digital and Seagate each dropped several points Wednesday, while Samsung Electronics and SK Hynix fell sharply in Seoul. Some analysts countered that such innovations might ultimately expand total demand through the Jevons paradox, where efficiency lowers costs and draws more users.
A U.S. federal judge certified a class-action lawsuit against Nvidia and CEO Jensen Huang this week over claims the company hid over $1 billion in cryptocurrency mining revenue from GPUs in 2017-2018. Filed in 2018, dismissed in 2021 and revived on appeal, the case heads to trial with a management conference on April 21. The SEC fined Nvidia $5.5 million in 2022 for related disclosure failures.
Nvidia's $20 billion licensing deal with AI startup Groq from late 2025 also faces scrutiny. Senators Elizabeth Warren and Richard Blumenthal questioned last week whether it was structured to dodge antitrust review and cement Nvidia's AI computing dominance. Nvidia insists it did not acquire Groq, which remains independent, and the license is non-exclusive.
The stock slide extends Nvidia's rough 2026 start, down over 4% year-to-date after a 35% gain in 2025. Despite a record $68.1 billion quarterly revenue report, investors question the sustainability of AI capital spending amid rising competition.
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