US technology shares fell sharply on Friday as disappointing earnings from a major chipmaker heightened investor worries about slowing growth in the artificial intelligence sector.
The Nasdaq Composite dropped 1.2% in early-afternoon trading in New York, with semiconductor company Marvell Technology plunging 17.6% after its data center revenue fell short of analyst expectations. Bank of America downgraded Marvell to “neutral” from “buy.”
Nvidia, the $4 trillion semiconductor giant, also declined 3.6% following a revenue forecast that fell short of investor expectations and uncertainty over US export controls affecting sales in China. The Philadelphia Semiconductor Index, tracking 30 of the largest chipmakers, was on track for its worst session since late July.
Wall Street’s broader benchmark, the S&P 500, fell 0.8%, marking its biggest one-day drop since early August.
Tech stocks have driven US equities to record highs, but rising investment in AI infrastructure has recently spurred caution among investors. “Though [Nvidia] didn’t exactly disappoint expectations, concerns about its China penetration and forward guidance somewhat dampened enthusiasm,” said Florian Ielpo, head of macro at Lombard Odier Investment Managers.
Marvell, which builds custom chips for Amazon and Microsoft, had benefited from investor excitement around AI hardware last year. But shares have fallen over 40% this year amid trade uncertainties and questions over its ability to expand its client base. Its warning of slower data center growth coincided with Chinese ecommerce giant Alibaba announcing a new semiconductor chip as part of a Beijing-backed effort to rival Nvidia’s H20 processors.
Nvidia earlier this year reached an agreement with the Trump administration to resume H20 exports to China, with the US government receiving 15% of sales revenue. However, the plan has yet to be fully codified, adding to investor caution.
The broader AI hardware market is also seeing competition from China. Domestic chipmaker Cambricon recently posted record first-half profits and unveiled technological upgrades, with shares more than doubling this year. US server maker Super Micro Computer, critical to Nvidia’s supply chain, fell 5.3% after citing “material weaknesses” in its financial reporting controls.
