U.S. chip stocks experienced their worst day since 2020 on Thursday, with a significant drop triggered by a conservative forecast from Arm Holdings, which dampened investor optimism about artificial intelligence (AI). Data indicating a cooling economy also contributed to the decline.
Arm Holdings, a British chip designer, saw its shares fall by 16%. The forecast raised concerns that the returns from AI computing investments by major companies like Microsoft, Alphabet, Amazon, Meta Platforms, and other tech giants might take longer to materialize than previously anticipated.
Art Hogan, chief market strategist at B. Riley Wealth, noted, “Arm is responsible for a lot of the impact on semiconductors today after their guidance. It’s an important company, but perhaps not as important as we made it this year in terms of valuation.”
The losses in chipmakers’ shares and the broader market accelerated as economic data heightened concerns about a faster-than-expected economic slowdown, all while the Federal Reserve maintained its restrictive monetary policy.
Market Performance on Thursday
| Index/Company | Performance | Notes |
|---|---|---|
| S&P 500 (.SPX) | -1.4% | |
| Nasdaq (.IXIC) | -2.3% | Down almost 8% from July 10 record high |
| Intel (INTC) | -13% (extended) | Announced 15% workforce cut, dividend suspension |
| PHLX Semiconductor Index (.SOX) | -7.1% | Worst one-day decline since March 2020 |
| Nvidia (NVDA) | -7% | Reversed gains from previous day |
| Arm Holdings (O9Ty.F) | -16% | Conservative forecast impacting sentiment |
Despite the recent drop, Nvidia shares remain 121% higher in 2024, though they are down 19% from their record high close on June 18. The chip index is up 16% in 2024.
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