Nvidia and other semiconductor stocks fell Tuesday amid reports of industry sales weakness and an economic slowdown in China.
The Philadelphia semiconductor index, known as SOX, plunged 7.8% on the stock market today. The SOX includes the 30 largest semiconductor stocks traded in the U.S.
AI chip powerhouse Nvidia continued its post-earnings report slide. Nvidia stock fell 9.5% to close at 108.
Fellow AI chip producers also retreated. Advanced Micro Devices dropped 7.8% to 136.94. Broadcom slid 6.2% to 152.79. And Marvell Technology sank 8.2% to 70.02.
Other Top Semiconductor Stocks Knocked Down
Chip designer Arm Holdings declined 6.9% to 123.74. Wireless-chip leader Qualcomm pulled back 6.9% to 163.24.
Two semiconductor stocks on the IBD 50 list of elite stocks also took a hit. U.S. shares of chip foundry Taiwan Semiconductor Manufacturing fell 6.5% to 160.49. And audio-chip vendor Cirrus Logic dropped 5.6% to 137.47.
Other major chip manufacturers getting a haircut on Tuesday included Texas Instruments and Analog Devices. TI stock sank 5.8% to 201.83. ADI stock declined 6.5% to 218.71.
Memory-chip leader Micron Technology saw its shares fall 8% to 88.58.
Downbeat Reports Weigh On Chip Stocks
Mizuho Securities trading-desk analyst Jordan Klein said investors likely wanted to lower their exposure to semiconductor stocks amid increasing risks of a "hard landing" for the economy.
Tuesday's trading action bore the hallmarks of quantitative trading, Klein told IBD.
Semiconductor stocks reacted negatively to several reports.
First, data out Saturday showed that China's factory activity contracted for a fourth straight month in August, Bloomberg reported. The news is the latest sign that the world's second-largest economy may struggle to meet its growth target for the year.
"China data was not good over the weekend," Klein said.
Second, the Semiconductor Industry Association on Tuesday reported below-seasonal chip sales for the month of July.
UBS analyst Timothy Arcuri said the 11.1% drop in chip sales from June to July was below the 5-year and 10-year averages.
"Memory was the main downside driver," Arcuri said in a client note. "Key segments including MCU (microcontroller unit), DSP (digital signal processor) and analog posted declines that were worse than their respective seasonal trends over both the past five and 10 years."
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