Nvidia Stock Takes a Hit Amid AI and Semiconductor Sell-Offs

Nvidia (NVDA) is experiencing significant sell-offs in today’s trading session. As of 2 p.m. ET, the company's stock price had dropped by 5.1%, mirroring broader market declines with a 2% drop in the S&P 500 and a 2.5% decline in the Nasdaq Composite.

Today, investors are pulling back from artificial intelligence (AI) and semiconductor stocks. This shift follows a downturn in shares for Marvell Technology, which saw a substantial drop despite reporting quarterly results that were better than expected. The market reacted negatively to Marvell’s performance, leading to broader sell-offs in AI stocks, including Nvidia. Investors seem to be signaling a preference for higher growth rates to justify current valuation levels, particularly in light of underlying macroeconomic and geopolitical risks.

Nvidia's Decline Following Marvell's Q4 Performance

Marvell reported a non-GAAP (adjusted) earnings per share of $0.60 for the fourth quarter, surpassing Wall Street's expectation of $0.59. Additionally, their sales amounting to $1.82 billion exceeded analyst forecasts by $20 million. However, investors reacted poorly to Marvell's yearly growth rates, which showed approximately 27% growth in sales and 33% growth in adjusted earnings, indicating dissatisfaction with these figures.

The forecast provided by Marvell was also deemed insufficient to foster a bullish outlook. While they projected revenue of about $1.875 billion—surpassing the consensus estimate of $1.87 billion—the anticipation for an adjusted gross margin of 60% indicating strong earnings could not prevent the substantial sell-offs both for Marvell and broadly across AI stocks, including Nvidia.

The Market's Bearish Outlook on Nvidia

Marvell stands out as a critical player in the connectivity chip sector, reflecting the demand trends that have surged alongside the growth of AI technology. As such, the company’s results are often considered a bellwether for overall market conditions in the AI space.

Despite Marvell's recent positive fourth-quarter results, investor sentiment appears increasingly cautious regarding the valuations assigned to AI stocks. This growing wariness is contributing to the downward pressure on Nvidia shares, as the market reacts to perceived valuation risks and demands more robust growth to sustain high stock prices.

Note: The author has no positions in any of the stocks mentioned. Nvidia and Marvell Technology are recommended by market analysts.

Nvidia, Stocks, Selloff