Nvidia Shares Drop 7% Amid Investor Concerns Over AI Chip Delays

Nvidia shares fell 7% in extended trading on September 3, 2024, as the AI powerhouse failed to meet Wall Street's high expectations. The lack of commentary on the delay of its next-generation "Blackwell" chips contributed to investor uncertainty, sparking a broader sell-off in the semiconductor sector.

Although Nvidia forecasted its third-quarter revenue at $32.5 billion, slightly higher than the average analyst estimate of $31.9 billion, expectations had soared as high as $37.9 billion. The stock had already declined by 2% in regular trading hours.

The drop in Nvidia’s stock triggered a broader market reaction, with other major semiconductor companies like Micron Technology, KLA, and Advanced Micro Devices (AMD) also experiencing significant declines. The VanEck Semiconductor ETF (SMH), a key indicator for the semiconductor sector, fell by 3.9%, marking its largest one-day loss since August 2. Other chipmakers, including Intel, also faced sharp declines, with Intel’s stock falling over 5%.

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The decline extended beyond the semiconductor sector, impacting broader markets. The S&P 500 dropped 1.3%, the Nasdaq 100 slid 2.1%, and the Dow Jones Industrial Average fell 1%, losing 460 points. Boeing Co. also saw a significant drop, sinking about 9% following an analyst downgrade. The Russell 2000 index of smaller companies lost 2%.

This sell-off in semiconductor stocks comes amid ongoing concerns about the sustainability of heavy spending on hardware for artificial intelligence (AI) computing. While Nvidia and other chipmakers have seen a revenue surge due to significant investments by companies like Microsoft Corp. and Alphabet Inc., there are growing doubts about the long-term viability of such expenditures, especially as those companies have reported limited revenue growth from these investments.

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Intel, whose shares have been among the worst-performing in the Philadelphia Semiconductor Index this year, saw a decline of up to 7.4%. Bloomberg reported last week that Intel is exploring various strategic options with investment bankers, including potentially splitting its product design and manufacturing businesses.

[Disclaimer: This article is for informational purposes only and does not constitute financial advice.]