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Nvidia shares sank by as much as 8 per cent on Tuesday as a heavy sell-off in chipmaking stocks reignited ahead of a number of closely watched earnings reports from Big Tech companies this week.
The Silicon Valley chipmaker, which is the dominant provider of the powerful processors needed for building artificial intelligence systems, has lost almost $750bn in market capitalisation since it briefly became the world’s most valuable publicly traded company last month.
Other chip stocks followed. Arm, the semiconductor designer that has also been a big beneficiary of investors’ enthusiasm for AI-related stocks this year, was also 7 per cent lower in intraday trading on Tuesday.
Both companies are still up by more than 100 per cent for the past year, driven by a wave of capital spending by the likes of Microsoft, Google, Amazon and Meta to build out the technical underpinnings of AI.
Ahead of Microsoft’s earnings report on Tuesday after the markets close, some traders are fretting that profit expectations for companies involved in AI are too high and that capital spending is running far ahead of returns.
The tech-heavy Nasdaq Composite index was down 1.9 per cent in early afternoon trading while the benchmark S&P 500 was 1 per cent lower. As well as Nvidia, shares in chipmakers AMD and Intel — who also report this week — were trading lower.
“There’s a lot of angst in the market ahead of reporting,” said Emmanuel Cau, head of European equity strategy at Barclays. Apple, Amazon and Meta will be publishing their quarterly numbers later this week.
He added that investors were also cautious ahead of a busy few days for central banks, with interest rate decisions by the Bank of Japan, Federal Reserve and Bank of England all due.
Investors have been selling tech companies in recent weeks, pushing the Nasdaq down about 9 per cent from its peak in mid-July. The index suffered its worst day since 2022 last week following results from Alphabet and Tesla.
Cau said the rotation out of tech stocks was “all about position-driven moves while investors await clarity from macro data and earnings”.
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