The semiconductor, hardware, and artificial intelligence (AI) sectors have been experiencing a sharp decline in stock prices, with Nvidia Corp (NVDA) leading the charge. This downturn comes despite strong earnings reports from key players like Nvidia and Broadcom Inc (AVGO).
The selloff in AI stocks, including Nvidia, Advanced Micro Devices, Inc (AMD), and Taiwan Semiconductor Manufacturing Co (TSM), continues its downward trajectory. Investors are expressing concerns about valuation and the potential for slowing demand, even as analysts remain optimistic about the long-term growth of the AI sector.
Broadcom’s recent third-quarter earnings report showcased strong revenue growth of 42% to $13.07 billion, exceeding analyst expectations. The company anticipates fourth-quarter revenue of $14 billion, surpassing the consensus forecast. JPMorgan analyst Harlan Sur remains optimistic, citing robust AI growth, VMware momentum, and recovery in traditional semiconductor sectors.
Nvidia’s second-quarter revenue surged 122% to $30.04 billion, exceeding analyst estimates. However, the company’s adjusted gross margin saw a decline. Despite this, BofA Securities analyst Vivek Arya maintains a bullish outlook driven by data center and AI training demand, along with supply chain recovery.
The overall semiconductor industry is experiencing a downturn, with the VanEck Semiconductor ETF (SMH) and iShares Semiconductor ETF (SOXX) both down by 12% in the past five days. Nvidia has dropped 15% in the same period, while AMD and Taiwan Semiconductor have lost over 10% and 8%, respectively.
This sell-off persists despite assurances from contract chipmakers like Taiwan Semiconductor and Samsung Electronics regarding sustained AI demand. ETFs tracking riskier indexes have also experienced volatility, with ProShares Ultra Semiconductors USD losing 26% in the past five days.
However, ETFs tracking broader indexes like the S&P 500 and NASDAQ have seen less severe losses due to the performance of Big Tech stocks such as Apple Inc (AAPL), Amazon.Com Inc (AMZN), and Microsoft Corp (MSFT). The SPDR S&P 500 ETF Trust (SPY) has lost 3.5% in the past five days, while the Invesco QQQ Trust, Series 1 (QQQ), which tracks the NASDAQ index, has lost 5%.
