Tech stocks across the globe took a hit following Nvidia’s recent financial results, with chipmakers in Asia, Europe, and the United States all experiencing declines in their stock values. Despite Nvidia surpassing analyst expectations in its fiscal second-quarter earnings report, traders were disappointed with the growth rates, leading to a sell-off in the semiconductor industry.
Chipmakers in Asia
In Asia, South Korean companies SK Hynix and Samsung Electronics, both suppliers to Nvidia, saw significant losses in their stock prices. SK Hynix, a manufacturer of high bandwidth memory chips used in AI applications for Nvidia, saw a 5.4% decline in its stock value. Samsung Electronics, the highest-weighted stock on South Korea’s benchmark Kospi index, fell over 3% due to concerns about its supplier relationship with Nvidia.
While the exact extent of Samsung’s partnership with Nvidia is not fully disclosed, it is believed that the company is involved in manufacturing HBM chips for certain Nvidia products. This uncertainty surrounding the collaboration contributed to the drop in Samsung’s stock price. Other suppliers to Nvidia, such as Taiwan Semiconductor Manufacturing Company and Hon Hai Precision Industry, also experienced losses of approximately 2% and 1%, respectively.
In Japan, semiconductor manufacturing firm Tokyo Electron saw a 2% decrease in its stock value. However, not all chipmakers in Asia were in the red on Thursday. Chinese state-backed chipmaker SMIC saw a nearly 1% increase in its stock price, while Hua Hong Semiconductor rose almost 3%. These gains were part of a broader positive trend in Hong Kong’s Hang Seng Index, which was up 0.5% on Thursday.
Chipmakers in Europe
Moving to Europe, Dutch chip firm BE Semiconductor experienced a 0.4% decline in its stock price during early morning trading. Conversely, compatriot company ASML, a major semiconductor equipment maker, saw its shares climb 1%. Other Dutch chipmakers, such as STMicroelectronics and ASMI, rose by 2% and 1%, respectively. German semiconductor company Infineon also saw a 1% increase in its stock value.
Chipmakers in the United States
In the United States, Nvidia’s rival chipmaker AMD, which has also benefited from the artificial intelligence boom, fell nearly 4% in extended-hours trading. Other U.S.-based chipmakers, including Arm, Broadcom, and Qualcomm, also experienced declines in their stock prices. Super Micro, a chipmaking firm, saw a significant 7% drop in after-hours trading, following a 19% decline in the previous day’s trading session. The company’s stock was affected by a delay in its annual report after allegations of accounting manipulation surfaced.
The overall decline in tech stocks, particularly in the semiconductor industry, has raised concerns among investors about the future growth prospects of these companies. While Nvidia’s quarterly results exceeded expectations, the market reaction suggests uncertainty about the company’s ability to sustain its growth momentum in the current quarter.
Analysts’ Perspectives
According to Luke Rahbari, CEO of Equity Armor Investments, Nvidia’s results were positive, but the market may be adjusting to a perceived slowdown in the company’s growth trajectory. Rahbari highlighted Nvidia’s dominant position in the industry but noted that expectations of explosive growth may need to be tempered.
Mark Lushcini, chief investment strategist at Janney Montgomery Scott, described the decline in Nvidia’s shares as a “rounding error,” considering the significant rise in the company’s stock price over the year. He pointed out that Nvidia’s growth rate has been slowing for several quarters, making it challenging for the company to meet the high demands of investors trading at 40-50 times forward earnings.
Nvidia’s gross margin also slipped in the recent period, raising concerns among analysts about the company’s profitability. The annual gross margin forecast provided by Nvidia was lower than analysts’ estimates, indicating potential challenges ahead in maintaining profitability levels.
Despite the market reaction to Nvidia’s results, some chipmakers were able to buck the trend and experience positive stock movements. Chinese chipmaker SMIC and Hua Hong Semiconductor saw gains in their stock prices, reflecting pockets of strength in the semiconductor industry amidst broader market uncertainties.
In conclusion, the decline in tech stocks globally following Nvidia’s results highlights the inherent volatility in the semiconductor industry. While some companies were able to weather the storm and even see stock price increases, the overall sentiment remains cautious as investors assess the future growth prospects of key players in the sector.