Nvidia Shares Plunge, Dragging Chip Stocks Down with It
Nvidia, a leading chipmaker, saw its stock price plummet by 9.5% on Tuesday, causing nearly $300 billion to be wiped off its market cap. This sharp decline also had a ripple effect on other chip stocks, with Intel falling almost 8%, Marvell sliding 8.2%, Broadcom losing about 6%, AMD dropping 7.8%, and Qualcomm falling nearly 7%. The VanEck Semiconductor ETF (SMH), which tracks semiconductor stocks, experienced its worst day since March 2020, down by 7.5%.
The market turbulence was driven by sluggish economic data, as the ISM manufacturing index reported August figures below consensus expectations. This raised concerns about the strength of the economy but also raised speculation about potential interest rate cuts by the Federal Reserve to combat economic challenges.
Chip stocks have been on a rise over the past year due to optimism surrounding the artificial intelligence (AI) boom, driving increased demand for semiconductors and memory to meet the computational needs of AI applications. Nvidia, a dominant player in the AI data center chip market, has been a key beneficiary of this trend, with the stock up 118% in 2024.
While Nvidia leads in AI data center chips, other chip companies like Intel, AMD, Broadcom, and Qualcomm are also striving to capitalize on the AI growth trend. Intel recently announced new laptop processors that can run AI programs on the device itself, reducing reliance on cloud servers. Broadcom, known for developing custom AI chips for large corporations, is set to report third-quarter earnings soon.
Despite Nvidia’s strong revenue report of $30 billion for the quarter ending in July, with robust growth in its data center business fueled by AI processors, some investors found Nvidia’s sales growth forecast for the current quarter slightly disappointing, leading to a brief downturn in chip suppliers.
The implications of Nvidia’s stock plunge on the semiconductor industry and consumers remain uncertain, with market observers closely monitoring future developments in this dynamic sector.
