Nvidia plunges almost 10%, dragging basket of chip stocks to worst day since March 2020

Nvidia plunged 9.5% on Tuesday, wiping nearly $300 billion off the chipmaker's market cap and pulling chip stocks down with it.

Intel fell almost 8%, Marvell slid 8.2%, and Broadcom lost about 6%. AMD dropped 7.8%, and Qualcomm fell nearly 7%. The VanEck Semiconductor ETF (SMH), an index that tracks semiconductor stocks, was down 7.5%, its worst day since March 2020.

Markets were sluggish Tuesday after the ISM manufacturing index reported August figures that came in below consensus expectations — raising fears about the strength of the economy but also potentially increasing chances that the Federal Reserve will cut interest rates.

Chip stocks have been rising in the past year on optimism that the artificial intelligence boom will require companies to buy more semiconductors and memory to keep up with rising computational requirements for AI applications.

The sector has been led by Nvidia, which dominates the market for AI data center chips. The stock is still up 118% in 2024.

Other chip companies are vying to get in on the growth. Intel and AMD sell AI chips, though with limited market penetration so far. Broadcom works on Google's TPU chips, and Qualcomm is promoting its chips as the best for running AI on Android phones.

Last week, Nvidia reported $30 billion in revenue for the quarter ending in July, higher than Wall Street's already elevated expectations. Revenue in the company's data center business, which includes AI processors, climbed 154% on an annual basis, partially powered by a handful of cloud and internet giants that buy billions of dollars of Nvidia chips each quarter.

Nvidia said it expects 80% sales growth in the current quarter.

Some investors saw Nvidia's forecast as disappointing, briefly hitting chipmakers