Why Nvidia and Chip Stocks Had Their Worst Week in 2 Years

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• Chip stocks had their worst week since January 2022 as AI investor favorite Nvidia lost about 14% in the holiday-shortened trading week.

• Broadcom shares fell 10% after the company disappointed investors with its earnings report, and shares have lost nearly 16% of their value this week.

• The tough week for stocks comes as concerns about the health of the economy grow.

• Investor concerns about AI spending also weighed on sentiment.

Chip stocks fell this week, with the PHLX Semiconductor index (SOX) down 10%, the biggest weekly drop since January 2022.

Market Dear Nvidia (NVDA) fell 4.1% on Friday to end the holiday-shortened trading week down nearly 14%. That’s about as much as Intel loses (INTC), which on Tuesday was hit by reports that it could lose its coveted spot in the Dow Jones Industrial Average.

Broadcom (AVGO) fell 10% on Friday after posting disappointing quarterly results on Thursday afternoon. The stock has lost nearly 16% of its value this week.

Concerns about AI spending are weighing on sentiment

The tough week for stocks comes as concerns about the health of the economy grow. The U.S. added fewer jobs than expected in August, according to Labor Department data released Friday, adding to mounting evidence that the U.S. economy is slowing. A similar report on August 2 capped semiconductors’ second-worst week of the year (-9.7%).

Economic concerns have coincided with a shift in investor sentiment around artificial intelligence (AI). Corporate spending on artificial intelligence, once music to Wall Street’s ears, has come under scrutiny in recent months. Big tech’s rising capital spending has some investors worried about when — or if — the spending will be recouped. That dampened the mood of tech investors and hurt shares of semiconductor companies whose products are the vital organs of artificial intelligence.

The industry’s second-quarter earnings, particularly the outlook for the rest of the year, also struggled to meet investors’ extremely high expectations. Nvidia beat earnings expectations again last week, but growth slowed. And after a year of blowout reports, its good sales guidance just wasn’t good enough.

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