Nvidia shares slide, chip sector dragged down

Semiconductor stocks led by Nvidia Corp. suffered a sharp decline on Tuesday, during a broadly bearish day for the market. The S&P 500 fell more than 1%.

Nvidia shares fell about 8%, Intel Corp. fell about 8%, Marvell Inc. dropped 7% and Broadcom Inc. slipped more than 6%.

AMD and Qualcomm Inc. fell about 6%. The SMH Index, which tracks semiconductor stocks, fell 6%, heading for its biggest one-day loss in a month.

Markets were sluggish on Tuesday after the ISM manufacturing index reported weaker-than-expected August numbers, raising concerns about the strength of the economy but also potentially increasing the chances of the Federal Reserve cutting interest rates, according to CNBC.

Chip stocks have soared in the past year on optimism that the AI ​​boom will require companies to buy more semiconductors and memory chips to keep up with the growing cloud demands for AI applications.

The sector is led by Nvidia, which is still up about 129% so far in 2024, and which dominates the market for AI data center chips.

Other chip companies want investors to see their AI products and growth potential. Intel and AMD sell AI chips, though demand for them is lower than Nvidia’s. Broadcom is working on TPU chips for Google, and Qualcomm is promoting its chips as the best for running AI on Android phones.

Last week, chipmaker Nvidia reported quarterly earnings of $30 billion for the quarter ended July, above Wall Street’s already high expectations. Revenue from the company’s data center business, which includes AI processors, rose 154% year over year, helped in part by a group of cloud and internet giants that buy billions of dollars worth of Nvidia chips each quarter. Nvidia said it expects sales to grow 80% in the current quarter.