Shares of Advanced Micro Devices Inc. (AMD) were falling 7% in Thursday afternoon trading, making it one of the biggest laggards in the S&P 500 index. This decline comes as the chip sector as a whole sells off sharply following Nvidia Corp.’s blowout results and optimistic forecast.
Nvidia’s strong performance can be both a blessing and a curse for its peers in the chip industry. While companies like AMD have their own AI chips and the potential to benefit from similar tailwinds, Nvidia remains far ahead in the artificial intelligence market.
Furthermore, Nvidia’s eye-popping revenue forecast and its talk of strong visibility into future demand could be reinforcing a Wall Street fear that spending on AI hardware is eroding the budget share for traditional chips. This concern has been acknowledged by Intel Corp.’s management in their recent report, causing Intel shares to drop 3.4% in Thursday afternoon trading.
Other notable laggards include Marvell Technology Inc. and Super Micro Computer Inc., both experiencing declines of over 5%. Marvell is set to release its earnings after Thursday’s closing bell.
The PHLX Semiconductor Index is down about 2% in the remaining two hours of trading.
Mizuho analyst Jordan Klein remarks that the semiconductor backdrop has been challenging recently, with few companies besides Nvidia performing well. For example, Analog Devices Inc. provided downbeat guidance but still saw its stock slightly higher due to being caught up “in the rally that was really all about Nvidia’s excitement.”
Over the past three weeks, chip stocks have been on a weak trend and are continuing down this path as investors feel that Nvidia’s success alone is not enough to sustain positive sentiment in the industry, according to Klein.
Read: Why Nvidia’s AI Bonanza May Have Only Just Begun