On Thursday, stock markets took a downturn, largely influenced by the performance of tech leader Nvidia (NVDA) following its earnings announcement on Wednesday, which negatively affected other semiconductor and AI stocks.

Nvidia’s stock experienced a drop of over 7% in recent transactions, pushing it down more than 15% from its peak earlier this year in January. Other chip manufacturers, such as Broadcom (AVGO) and Micron (MU), saw declines of approximately 6%, while the PHLX Semiconductor Index (SOX) fell by over 5%. 

Nvidia’s decline had a ripple effect on major stock indices. The tech-centric Nasdaq Composite registered a drop of more than 2% during late afternoon trading, while the S&P 500 fell 1%, even with nearly half of its components showing gains.

Although Nvidia exceeded analyst expectations with its quarterly earnings report, reporting a significant increase in data center revenue, a key indicator of AI demand, the stock still experienced volatility, fluctuating between gains and losses during post-market trading last night and into this morning.

Investors were anticipating a major stock movement following Nvidia’s earnings, with options indicating a potential rise or fall of 8% by the week’s end. The decline on Thursday put the stock on the trajectory to achieve an 8% drop from its price prior to the earnings report.

The selloff on Thursday hinted that while Nvidia’s results were satisfactory, they did not fully meet investor expectations. Concerns about excessive spending in the AI sector and prevailing economic conditions have dampened enthusiasm for AI investments in recent weeks, leading to a sell-off of high-valued AI stocks that accelerated throughout Thursday.

Shares of Super Micro Computer (SMCI), which surged the previous day after narrowly avoiding delisting from Nasdaq, plummeted over 16%. Vistra (VST), a nuclear energy provider that gained over 200% last year, declined by 11% as the overall AI downturn overshadowed its better-than-anticipated earnings announcement. Palantir (PLTR), another popular AI stock, dropped by 5%.