Stocks related to artificial intelligence (AI) are experiencing a downturn compared to the bullish trend that drove the global stock market earlier in 2024 amid escalating geopolitical tensions, concerns over delayed U.S. interest rate cuts, and challenges within the semiconductor industry.

On Friday (local time), Nvidia Corp. shares plunged to $762, or a 10 percent drop on the New York stock market. The fall led to a $200 billion loss in market capitalization in a single day, the largest such drop since March 2020, with Nvidia‘s stock previously surging by 98 percent until the end of March.

Other AI-related chip stocks, including Broadcom Inc. and Advanced Micro Devices Inc., also saw significant declines, resulting in a 4.12 percent drop in the Philadelphia Semiconductor Index within a day. Recent concerns over inflation, high interest rates, and skepticism about the chip industry are believed to have triggered the latest, significant correction.

Nvidia’s sharp decline on that day was partly attributed to Super Micro Computer Inc., a manufacturer of server computers that uses Nvidia’s graphics processing units (GPUs). Super Micro Computer postponed its earnings call, causing its stock prices to plummet by 23 percent and impacting Nvidia as well.

Dutch chip equipment company ASML Holding N.V. also reported a 27 percent decrease in revenue compared to the previous quarter earlier in the week. The following day, Taiwan Semiconductor Manufacturing Co. (TSMC) lowered its growth rate projection for the chip market in 2024, excluding memory chips, to around 10 percent from 10 percent or more.

Some analysts suggest that the technology sector, which has seen considerable growth, is almost at the profit-taking stage as the global macroeconomic landscape changes rapidly.

After the Nvidia shock over the weekend, there are fears of another correction on Monday. Given that companies like TSMC, Tokyo Electron Ltd. and SK hynix Inc. that are part of Nvidia‘s value chain have shown similar trends to Nvidia’s stock price, any guidance from these companies that falls short of market expectations could lead to a sharp decline in stock prices.

Analysis indicates that earnings calls from SK hynix, as well as U.S. tech giants such as Meta Platforms Inc. and Microsoft Corp. that are scheduled for this week are likely to impact semiconductor stocks further.

By Kim Je-lim, Lee Duk-joo and Chang Iou-chung

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