Nvidia's forecast dampens AI enthusiasm in other tech stocks

Nvidia's disappointing earnings drag down tech stocks, impacting market sentiment and fueling concerns about AI technology valuations.

Nvidia dragged technology heavyweights lower after the chip maker's earnings disappointed investors who had been hoping they would fuel fresh gains in Wall Street's most valuable companies, and sent stocks in Asia down on Thursday.

Nasdaq futures initially dropped about 1% following Nvidia's quarterly earnings report late Wednesday, suggesting traders expected tech stocks to lose ground.

Nvidia dropped almost 7% and lost $200 billion in stock market value after it forecast third-quarter gross margins that could miss market estimates and revenue that was largely in line. A handful of other AI-related companies shed around $100 billion in combined value.

Shares of Broadcom and Advanced Micro Devices were each down about 2%. Microsoft and Amazon each dipped almost 1%.

Weakness in tech stocks continued into Asian trade on Thursday. Nvidia's chip contractor TSMC slid 2%, and declines in other tech names weighed on shares in Tokyo and Seoul, dragging Korea's KOSPI to a two week low.

Nvidia's Frankfurt-listed shares slightly pared back the after-hours move, falling 5%. Even if Wednesday's late-day dip extends into Thursday, it would be well short of the 11% price swing the options market had priced for the shares, according to data from options analytics firm ORATS.

Surging demand for its AI chips helped Nvidia crush consensus analyst estimates for several quarters, a trend that led investors to expect the company to exceed forecasts by higher and higher margins.