New Delhi: Shares of AI leader Nvidia (NVDA.O) plummeted by 9.5%, marking the steepest single-day market value drop for a U.S. company, as a broad market sell-off ensued following lukewarm economic data, dampening investor enthusiasm for artificial intelligence.
Nvidia’s market capitalization plunged by $279 billion, signalling growing investor caution towards the burgeoning AI technology that has significantly propelled this year’s stock market rally.
The PHLX semiconductor index (.SOX) experienced a sharp 7.75% fall, its most significant one-day decline since 2020.
This unease around AI was exacerbated after Nvidia’s quarterly forecast last Wednesday fell short of the high investor expectations that had fueled a rapid surge in its stock value.
Todd Sohn, an ETF strategist at Strategas Securities, noted, “The trade is completely skewed due to the massive influx of money into tech and semiconductors over the past 12 months.”
Meanwhile, Intel (INTC.O) saw its shares drop nearly 9% following a Reuters report that CEO Pat Gelsinger and top executives are slated to propose a plan to the board of directors aimed at divesting non-essential businesses and overhauling capital expenditure at the beleaguered chipmaker.
Concerns over the delayed returns from significant AI investments have recently weighed on the shares of Wall Street’s leading companies. Following their July quarterly reports, Microsoft (MSFT.O) and Alphabet (GOOGL.O) saw their shares decline. Nvidia, which had nearly tripled by its July peak, has since experienced losses, yet remains up 118% for the year.
On Tuesday, a broader downturn hit Wall Street, with the Nasdaq (.IXIC) falling 3.3% and the S&P 500 (.SPX) dropping 2.1%.
Investors are largely anticipating a 25 basis point reduction in interest rates from the Federal Reserve in its September 18 announcement, as suggested by CME’s FedWatch Tool. However, following Tuesday’s data indicating continued weakness in manufacturing, the expectation for a more aggressive 50 basis point cut has increased to 37%. This week, a series of labour market data will be released, culminating with the crucial government payroll report on Friday.
