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Nvidia's Steep Decline Drags Chip Stocks Down
On Tuesday, the semiconductor sector experienced a significant downturn, primarily driven by Nvidia's sharp decline. The S&P 500 index fell by over 1%, reflecting a sluggish trading day. Nvidia's stock plummeted nearly 8%, wiping out almost $300 billion in market capitalization and weighing heavily on the broader market.
Intel and Marvell also saw substantial losses, with declines of 8% and 7%, respectively. Broadcom decreased by over 6%, while both AMD and Qualcomm faced a 6% decline. The SMH index, which monitors semiconductor stocks, fell by 6%, marking its most significant single-day decrease in a month.
The market's poor performance was influenced by the ISM manufacturing index, which revealed August data that fell short of consensus expectations. This outcome heightened concerns regarding economic stability and raised the possibility of the Federal Reserve reducing interest rates.
Over the past year, chip stocks have surged due to optimism surrounding the artificial intelligence (AI) boom, leading to increased demand for semiconductors and memory to support the growing computational needs of AI applications. Nvidia has been at the forefront of this sector, with its shares up nearly 129% in 2024, solidifying its position as a leader in the AI data center chip market.
Other semiconductor companies are also keen for investors to acknowledge their AI offerings and potential growth avenues. While Intel and AMD manufacture AI chips, their demand does not match that of Nvidia. Meanwhile, Broadcom collaborates with Google on TPU chips, and Qualcomm is marketing its chips as optimal for AI applications on Android devices.
Last week, Nvidia reported quarterly earnings of $30 billion for the period ending in July, surpassing Wall Street’s lofty expectations. The revenue from its data center segment, which encompasses AI processors, surged by 154% year-over-year, driven by substantial purchases from major cloud and internet corporations.
Nvidia anticipates an 80% increase in sales for the current quarter. However, some investors interpreted Nvidia's recent forecast as an indication of slowing growth, which briefly impacted chip suppliers providing memory and other components to Nvidia.
Intel introduced new laptop processors capable of running AI applications locally, eliminating the need for cloud server reliance. Broadcom, which partners with large firms to create custom AI chips, is set to announce its third-quarter earnings on Thursday.
Original Article: https://www.cnbc.com/2024/09/03/nvidia-tumbles-leading-chip-stocks-lower.html
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