Nvidia (NVDA) shares fell more than 6% on Thursday as semiconductor stocks led a sell-off in tech stocks amid signs of an economic slowdown.
Shares of the AI chip giant fell along with the rest of the technology sector (XLK) after weak economic data released during the session pushed the 10-year Treasury note (^TNX) yield lower and sent shares sliding.
Nvidia shares’ decline reversed a big 12% gain the previous day after rival AMD (AMD) reported better-than-expected quarterly earnings and guidance, suggesting its investments in AI are not slowing.
“Capex at these hyperscalers is high and could increase further through 2025, so this bodes very well for Nvidia,” Paul Meeks, co-chief investment officer at Harvest Portfolio Management, said Thursday.
Nvidia doesn’t disclose who its largest customers are, but Meta Platforms (META), Amazon (AMZN), Alphabet (GOOGL, GOOG) and Microsoft (MSFT) account for more than 40% of Nvidia’s revenue, according to Bloomberg data.
Microsoft accounted for about 19% of the AI chipmaker’s revenue, according to data compiled by Bloomberg. The tech giant this week revealed capital expenditures of about $56 billion for the fiscal year ended June 30.
Microsoft said it expects its infrastructure spending to increase in fiscal 2025 compared to fiscal 2024.
“I think the fears that some of this momentum may not continue, or that the earnings trajectory may not be sustained over the next 12 months or so, are starting to ease,” Angelo Gino, senior equity analyst at CFRA, told Yahoo Finance on Wednesday.
Meta, the social media giant that accounts for about 10% of Nvidia’s revenue, said it expects a “significant” increase in capital spending in 2025 after reporting strong financial results on Wednesday, according to Bloomberg data.
Semiconductor-related companies such as Broadcom (AVGO), Micron (MU), Taiwan Semiconductor (TSM), ASML (ASML), and Supermicro (SMCI) also fell on Thursday from the previous day.
While the entire semiconductor industry is benefiting from the AI boom, the biggest beneficiary is Nvidia, up about 130% year to date, while rival AMD is down about 9% since the start of 2024.
“Over time, the pie will get bigger. I still think Nvidia will have most of the share and AMD will be a good second supplier, but for the time being NVDIA will continue to dominate this market,” Meeks said.
On Wednesday, Morgan Stanley analysts led by Joseph Moore placed Nvidia on their “top pick” list following the company’s recent decline from its all-time high hit in June.
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Morgan Stanley cited spending plans, competition, export controls, supply chain concerns and valuation worries as five main factors for Nvidia’s recent share price decline, but said, “Despite these concerns, the earnings environment for Nvidia and the overall AI industry is likely to remain solid.”
The firm maintained its overweight rating and $144 price target on the stock.
Nvidia is scheduled to release its next quarterly report on Wednesday, August 28th.
Ines Ferre is a senior business reporter at Yahoo Finance. Follow her on X at @ines_ferre.
