The Nasdaq Composite dropped nearly 2% on Thursday, slipping below the 22,720 level during sharp midday trading. Markets reacted negatively after Nvidia shares fell about 5% despite reporting strong earnings and upbeat guidance.
The sell-off quickly spread across AI and semiconductor stocks, dragging the broader tech sector lower. The S&P 500 declined more than 1%, while the Dow Jones Industrial Average lost around 0.4%.
Investor sentiment shifted as traders questioned whether AI-driven valuations have become overstretched following the sector’s massive 40% rally over the past six months. Rising bond yields and lingering inflation uncertainty added further pressure to equities.
Nvidia’s strong results failed to excite Wall Street — a reaction many view as a warning sign. When a company beats expectations convincingly but its stock falls, it often signals that bullish positioning may already be crowded.
The risk-off tone was broad. Semiconductor names moved sharply lower, with Broadcom and Micron leading declines, while AMD and Intel also posted notable losses. The market is now reassessing whether the scale of AI spending will ultimately justify current valuations.
As Nvidia continues to act as a bellwether for the Nasdaq, traders are closely watching key technical levels. A sustained break below major support zones could open the door for a deeper correction.
Bottom line: This looks more like a valuation reset in overheated tech stocks rather than full-scale panic — but volatility has clearly returned to the market.
Frequently Asked Questions
Why did the Nasdaq fall even though Nvidia reported strong earnings?
Because markets are forward-looking. Despite Nvidia beating estimates, investors believe AI stocks may already be overvalued after the massive rally, triggering profit-taking.
Is this the start of a bigger tech market correction?
Not necessarily. For now, it appears to be a valuation reset in overheated AI and semiconductor stocks. However, if key support levels break, downside momentum could increase.
Why did other semiconductor stocks drop with Nvidia?
Nvidia is the bellwether of the AI trade. When its stock weakens, investors often reassess the entire semiconductor and AI ecosystem, leading to broad sector selling.
What should traders watch next?
Focus on bond yields, inflation data, and key technical support levels on the Nasdaq and Nvidia. These will likely determine whether the pullback stays shallow or deepens.
