Semiconductor stocks, led by Nvidia, fell Tuesday during an overall down day for the market. The S&P 500 slid by more than 1%.
Nvidia fell nearly 8%, Intel was off 8%, Marvell fell 7% and Broadcom slid more about 6%. AMD and Qualcomm fell 6%. The SMH, an index that tracks semiconductor stocks, was down 6%, on pace for its biggest one-day loss in a month.
Markets were sluggish Tuesday after the ISM manufacturing index reported August figures that came in below consensus expectations — raising fears about the strength of the economy but also potentially increasing chances that the Federal Reserve will cut interest rates.
Chip stocks have been rising in the past year on optimism that the artificial intelligence boom will require companies to buy more semiconductors and memory to keep up with rising computational requirements for AI applications.
The sector has been led by Nvidia, which is still up nearly 129% so far in 2024, and which dominates the market for AI data center chips.
Other chip companies want investors to recognize their AI products and the potential for growth. Intel and AMD sell AI chips as well, though demand for them is less than for Nvidia’s products. Broadcom works on Google’s TPU chips, and Qualcomm is promoting its chips as the best for running AI on Android phones.
Last week, Nvidia reported $30 billion in quarterly earnings for the quarter ending in July, higher than Wall Street’s already elevated expectations. Revenue in the company’s data center business, which includes AI processors, climbed 154% on an annual basis, partially powered by a handful of cloud and internet giants that buy billions of dollars of Nvidia chips each quarter.
Nvidia said it expects 80% sales growth in the current quarter.
But some investors saw Nvidia’s forecast last week as a slowdown in growth, briefly hitting chipmakers that supply Nvidia with memory and other parts.
Intel announced new laptop processors on Tuesday that can run AI programs on the device itself, instead of relying on servers in the cloud. Broadcom, which works with big companies to develop custom AI chips, reports third-quarter earnings on Thursday.