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Nvidia stock falls more than 6%, reversing Wednesday’s rally as chip stocks lead market lower
Nvidia ( NVDA ) stock slipped more than 6% on Thursday as chip stocks led a tech-fueled sell-off amid signs of a cooling economy.
Shares of the AI chip heavyweight declined along with the rest of the Tech sector ( XLK ) after weak economic data released during the session sent the 10-year Treasury (^ TNX ) yield lower and stocks fell.
Nvidia stock decline was a reversal from the prior session's monster 12% rally after peer AMD ( AMD ) posted better-than-expected quarterly results and guidance in a sign that investments in AI haven't slowed down.
"These hyperscalers ... their capital expenditures are high and potentially even rising into 2025. So this bodes incredibly well for Nvidia,” said Harvest Portfolio Management co-chief investment officer Paul Meeks on Thursday.
Nvidia doesn't reveal who its largest customers are, but according to Bloomberg data, Meta Platforms ( META ), Amazon ( AMZN ), Alphabet ( GOOGL , GOOG ) and Microsoft ( MSFT ) account for more than 40% of Nvidia's top line.
Microsoft makes up roughly 19% of the AI chipmaker's revenue, according to Bloomberg data. This week the tech giant revealed capital expenditures of almost $56 billion for the full year ending June 30.
Microsoft said it expects to increase its infrastructure investments in fiscal year 2025 more than it did in 2024.
"The fear of potentially some of this momentum not lasting, or maybe fear that the revenue trajectory wouldn't be there over the next 12 months or so — I think is starting to ease," CFRA senior equity analyst Angelo Zino told Yahoo Finance on Wednesday.
Social media giant Meta, which accounts for roughly 10% of Nvidia's revenue, per Bloomberg data, said it expects to see "significant" capital expenditures growth in 2025 after posting strong results on Wednesday .
Chip peers, including Broadcom ( AVGO ), Micron ( MU ), Taiwan Semiconductor ( TSM ), ASML ( ASML ), and Super Micro ( SMCI ), also sank on Thursday in a reversal from the prior session.
The semiconductor sector as a whole has benefited from the AI frenzy, but Nvidia is seen as the main beneficiary, up roughly 130% year to date. Rival AMD is down roughly 9% since the start of 2024.
"Over time, the pie will get bigger. I still think that Nvidia will have most of the slices, and AMD ... they’ll be a good second supplier. But NVDIA will have a hold on this market for as far as the eye can see," said Meeks.
On Wednesday Morgan Stanley's analysts led by Joseph Moore placed Nvidia on their 'Top Pick' list after a recent pullback from record highs reached in June.
Morgan Stanley cited five main drivers of the recent decline in Nvidia — spending plans, competition, export controls, supply chain fears, and valuation worries — but said, "Through those concerns, the earnings environment is likely to remain strong, for Nvidia and for the whole AI complex."
The firm maintained its Overweight rating and $144 price target on the stock.
Nvidia is set to issue its next quarterly report on Wednesday, Aug. 28.
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