Nvidia Slump Drags S&P 500 and Nasdaq Lower Amid AI Chip Competition
The S&P 500 and Nasdaq slipped on Thursday as Nvidia’s shares fell sharply, reflecting concerns about growing competition in the AI chip market. Investors also reacted to mixed economic data that had been delayed by the recent US government shutdown.
Tech Stocks Under Pressure
Nvidia dropped 6.7%, reaching a two-month low, while rival chipmaker Advanced Micro Devices declined 9%. The Philadelphia Semiconductor Index shed 3% after a strong rebound earlier in the week. Market analysts noted that the latest developments highlight the competitive nature of the chip industry. Phil Blancato, CEO of Ladenburg Thalmann Asset Management, said, “There’s a false expectation that only one company dominates, but today’s headlines remind us that competition is active.”
In contrast, Alphabet’s shares climbed 2.7% after reports that Meta Platforms was discussing using Google’s AI chips in its data centres by 2027 and renting chips from Google Cloud as early as next year. The gains helped lift communication services and healthcare stocks, which led the S&P 500 sector advances.
Economic Data and Market Outlook
At 10:17 a.m. ET, the Dow Jones Industrial Average rose 131.79 points, or 0.29%, to 46,583.58. The S&P 500 slipped 8.75 points, or 0.13%, to 6,696.37, while the Nasdaq Composite dropped 126.39 points, or 0.56%, to 22,744.50.
Retail sales increased by 0.2% in September, falling short of economists’ expectations for a 0.4% rise. A separate Commerce Department report showed producer prices rebounded, driven by higher energy costs. Despite the mixed data, traders continued to expect an 83% chance of a 25-basis-point interest rate cut next month, up from about 40% a week earlier, according to CME’s FedWatch Tool.
Analysts suggested that recent economic signs of slowing growth may encourage the Federal Reserve to cut rates in December. “The data is showing signs of cooling, which gives the Fed the first reason to consider easing,” said Blancato.
Sector Movers and Corporate Updates
Eight of the eleven major S&P 500 sectors gained, supported by communication services and healthcare stocks. Retail shares also rose as Kohl’s surged 34% and Abercrombie & Fitch jumped 28% after both companies raised their annual earnings forecasts. In contrast, Burlington Stores slumped 10.5% after missing third-quarter revenue expectations.
US-listed Alibaba shares slipped 2.3%, reversing early gains despite reporting stronger-than-expected quarterly revenue. On the Nasdaq, advancing issues outnumbered decliners by about 1.45 to 1, while on the NYSE the ratio stood at 2.3 to 1.
with inputs from Reuters