Shares of AI giant Nvidia (NVDA.O) plunged 9.5% on Tuesday, marking the largest single-day market value decline for a U.S. company ever, as investors reassessed their optimism about artificial intelligence amid a broad market selloff triggered by weak economic data. Nvidia’s market capitalization dropped by a staggering $279 billion, signaling growing caution among investors about the rapidly emerging AI technology that has driven much of this year’s stock market gains.
The PHLX semiconductor index (.SOX) also fell sharply, dropping 7.75%—its biggest one-day decline since 2020. The sudden dip in AI-related stocks followed Nvidia’s quarterly forecast last Wednesday, which failed to meet the high expectations of investors who had fueled a remarkable rally in its shares.
The recent market jitters surrounding AI investments have also impacted other tech giants. Shares of Intel (INTC.O) dropped nearly 9%, while Microsoft (MSFT.O) and Alphabet (GOOGL.O) saw declines following their quarterly reports in July. Concerns about the profitability of heavy AI investments are now causing investors to reconsider whether these expenditures will eventually pay off.
Despite these losses, Nvidia is still up 118% year-to-date, though it has fallen from its July record high. Tuesday’s drop in chip stocks coincided with broader declines on Wall Street, with the Nasdaq (.IXIC) falling 3.3% and the S&P 500 (.SPX) down 2.1%. Investors are now closely watching the Federal Reserve’s upcoming policy announcement on September 18th, with a 25-basis-point interest rate cut widely expected.