Nvidia Earnings Trigger Major Selloff in Chip and AI Stocks: What You Need to Know

On Thursday, stocks took a dive, largely influenced by Nvidia’s (NVDA) earnings report. The tech giant’s performance impacted not only its shares but also other semiconductor and AI-related stocks.

Nvidia’s shares dropped over 7%, marking a decline of more than 15% from its peak in January. Other chipmakers, like Broadcom (AVGO) and Micron (MU), also felt the sting, each falling about 6%. The PHLX Semiconductor Index (SOX) dropped more than 5% as well.

This downturn in Nvidia had a ripple effect on major stock indexes. The Nasdaq Composite, known for tech stocks, fell more than 2% by late afternoon. Although the S&P 500 was down only 1%, nearly half of its stocks were actually gaining ground.

In its fourth-quarter earnings report, Nvidia exceeded expectations. Its data center revenue, which is a good indicator of AI demand, nearly doubled compared to last year. However, the stock remained volatile, fluctuating between highs and lows in after-hours trading.

Investors had anticipated a significant move in Nvidia’s stock prices following the earnings announcement, predicting a rise or fall of about 8%. However, Thursday’s decline showed Nvidia was on track for an 8% drop from its price before the earnings release.

The selling on Thursday suggested that while Nvidia’s results were solid, they didn’t quite meet investor expectations. Concerns about high spending in the AI sector and the current economic climate have dampened enthusiasm around AI stocks recently. Many investors have been offloading costly AI stocks, a trend that intensified during Thursday’s selloff.

Super Micro Computer (SMCI), which surged after meeting a deadline to stay listed on Nasdaq, experienced a sharp drop of over 16%. Vistra (VST), a nuclear power company that saw gains of more than 200% last year, fell 11%, overshadowed by the ongoing decline in AI stocks. Palantir (PLTR), another popular choice for AI investments, saw its shares fall by 5% as well.

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