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Nvidia shares closed 7 percent lower on Tuesday as an enormous sell-off in chipmaker stocks flared up again ahead of a series of highly anticipated earnings reports from major technology firms this week.
The Silicon Valley chipmaker, the leading supplier of powerful processors used to construct artificial intelligence systems, has fallen greater than 20 percent since briefly becoming the world's most respected publicly traded company last month, wiping its market capitalization by nearly $750 billion.
Other chip stocks followed suit. Arm, the semiconductor maker that also benefited greatly this yr from investor enthusiasm for AI-related stocks, closed 6 percent down in New York.
Both Nvidia and Arm are still price greater than double what they were in the identical period last yr, because of a wave of investment by firms like Microsoft, Google, Amazon and Meta to expand the technical foundations of AI.
Ahead of Microsoft's earnings report, traders feared that earnings expectations for AI firms were too high and that capital spending would far exceed revenue. Microsoft shares fell in after-hours trading after the corporate said cloud growth was slowing as AI demand outstripped capability.
Samsung Electronics later said sales of its AI memory chips are expected to greater than triple within the second half of the yr in comparison with the primary half, pushing its share price up one percent in Seoul.
“We have seen money outflows from the large technology firms, mainly because they’ve had an incredible run-up, and that has naturally created room for a little bit of a sell-off,” Daniel Newman, CEO of Futurum Group, told the Financial Times. “Sector rotation, ongoing economic uncertainty, elections, geopolitics and concerns about China” all contributed to Nvidia's crash.
The technology-heavy Nasdaq Composite Index closed 1.3 percent lower, while the benchmark S&P 500 index fell 0.5 percent through the day. Shares of chipmakers AMD and Intel – that are releasing their results this week – also traded lower, losing almost 1 percent and a pair of.3 percent respectively.
“There is loads of fear available in the market before the figures are released,” said Emmanuel Cau, head of European equity strategy at Barclays. Apple, Amazon and Meta may also publish their quarterly figures later this week.
He added that investors were also cautious concerning the busy days ahead for central banks, with rate of interest decisions pending from the Bank of Japan, the US Federal Reserve and the Bank of England.
Investors have been selling technology firms in recent weeks, pushing the Nasdaq down about 8 percent from its mid-July peak. The index had its worst day since 2022 last week after results from Alphabet and Tesla sparked investor concerns concerning the level and timing of likely returns from the so-called Magnificent Seven technology firms' huge investments in AI.
Artificial intelligence stocks have driven the stock market rally this yr. Despite recent declines, the Nasdaq and the broader S&P 500 are still up about 14 percent.
“Market participants took advantage of this morning's gains to sell stocks this afternoon ahead of major announcements from the Fed and Bank of Japan tomorrow – and 4 of the Mag Seven releasing their reports this week,” said José Torres, chief economist at Interactive Brokers.
“Bull-oriented players will need to paint a positive picture of the long run of AI in Mag Seven's quarterly earnings calls.”
