Nvidia, a prominent player in artificial intelligence (AI), saw its shares plummet by 9.5% on Tuesday, marking the largest single-day decline in market value ever recorded for a U.S. company.
This significant downturn, resulting in a loss of $279 billion in market capitalization, highlights a growing investor apprehension towards the AI sector – a key driver of this year’s stock market growth.
Meanwhile, the PHLX chip index also experienced a substantial drop of 7.75%, its most considerable one-day decrease since 2020.
Market unease regarding AI intensified after Nvidia’s recent underwhelming quarterly forecast failed to meet the high expectations of investors, triggering a notable decline in its stock price.
Todd Sohn, an ETF strategist at Strategas Securities, highlighted the substantial flow of investment into tech and semiconductor sectors over the past year, leading to an imbalance in the trade.
In response to concerns over slow returns from substantial AI investments, key industry players like Microsoft and Alphabet have also faced market pressure, with their shares trading lower following quarterly reports in July.
BlackRock strategists pointed out the need for prudent evaluation of AI-related capital expenditures by companies to ensure effective utilization of resources and capital.
Despite a remarkable surge earlier in the year, Nvidia’s recent losses have narrowed its year-to-date gains to 118%.
The broader repercussions of Tuesday’s market trends were evident in significant declines across Wall Street, with the Nasdaq falling by 3.3% and the S&P 500 down by 2.1%. Intensified by widespread uncertainties, the decline in chip stocks underscored the cautious sentiment prevailing in the market.
