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Key Takeaways
- Nvidia and other chip stocks were among the worst-performing stocks in the S&P 500 Tuesday, weighing on the index.
- The losses come ahead of earnings this week from some of the chipmakers’ largest big tech customers amid concerns about their spending on AI infrastructure.
- Tuesday’s pullback also speaks to a broader market shift ahead of key decisions on interest rates from the Federal Reserve that could favor small-cap stocks.
Nvidia (NVDA), AMD (AMD), Qualcomm (QCOM) and other chip stocks lost ground in intraday trading Tuesday, dragging the tech sector and major indexes down with them.
The losses came ahead of earnings from some of the chip companies’ largest big tech customers, amid concerns about their spending on artificial intelligence (AI) infrastructure, and ahead of key decisions on interest rates from the Federal Reserve that could favor small-cap stocks.
The S&P 500 and Nasdaq Composite were both down sharply in late trading Tuesday, with Nvidia and other chip stocks among the biggest decliners.
Big Tech Earnings To Highlight Spending on AI, and Chips
With Microsoft set to report earnings after the bell Tuesday, Meta following on Wednesday, and Apple reporting Thursday, investors could get key updates on how big tech leaders are approaching AI investments, amid concerns about their costs.
Whether they signal a pullback to appease investors’ worries about AI’s hefty price tag, or double down, will have implications for chipmakers, whose products support the data centers powering AI, and could be some of the biggest beneficiaries of rising AI spending.
Earnings from AMD on Tuesday, chip designer Arm (ARM) on Wednesday, and Intel (INTC) on Thursday, could also speak to the rising appetite for AI chips.
Pullback Comes Amid Market Rotation Ahead of Key Fed Decisions on Interest Rates
Tuesday’s pullback from tech stocks also comes amid a broader market shift ahead of key decisions on interest rates from the Federal Reserve that could benefit small-cap stocks.
While the central bank isn’t expected to lower interest rates at its policy meeting tomorrow, expectations that the Fed will lower rates in September have fueled hopes that small-cap stocks could get a boost after lagging big tech companies’ performance so far this year.
However, CFRA, Wedbush, Bank of America, and UBS analysts have suggested earlier this month that the recent pullback in tech stocks could be temporary, citing strong fundamentals and surging demand for AI products, potentially offering long-term investors an opportunity to “buy the dip.”