Nvidia’s stock (NVDA) continued its downward slide in premarket trading on Tuesday, extending its post-earnings sell-off. The weakness can be attributed to several factors, including a general risk-off sentiment in the market, fueled by concerns ahead of the crucial monthly jobs report due on Friday. This report will likely influence the Federal Reserve’s upcoming rate decision on September 18th, with the futures market currently pricing in a 100% probability of a rate cut. When risk aversion prevails, growth stocks like Nvidia tend to suffer.
Adding to the pressure on Nvidia is the growing geopolitical tension surrounding the chip industry. Reports indicate that China’s chip technology is rapidly catching up, potentially negating the impact of U.S. export restrictions. Taiwan Semiconductor Manufacturing Company (TSMC), a key supplier to Nvidia, saw its shares fall in premarket trading after a Nikkei report suggested that China-made chips are now just three years behind TSMC’s technology. This news has raised concerns about the effectiveness of U.S. efforts to limit the export of high-performance chips. Furthermore, China has reportedly warned of retaliation if Japan curbs exports of chipmaking equipment to the country. Japan houses one of the largest semiconductor equipment companies, Tokyo Electron, and the U.S. has been urging Japan to limit sales of advanced chipmaking tools to China.
The overall decline in the chip sector is reflected in the premarket performance of other major players. TSMC fell by 2.01%, Micron Technology dropped by 1.77%, Advanced Micro Devices slipped by 1.29%, Arm Holdings declined by 1.89%, Intel retreated by 1.17%, Broadcom fell by 1.37%, Marvell Technology traded down by 1.135%, and the iShares Semiconductor ETF (SOXX) dipped by 1.47%. The ongoing uncertainty surrounding the global chip landscape and geopolitical tensions continue to weigh heavily on the semiconductor industry, leading to increased volatility in the stock market.
