Nvidia shares suffered their worst collapse since April and pulled most of the market with it

U.S. stocks fell in trading on Thursday, February 26: strong reports from technology giant Nvidia and software developer Salesforce failed to support the market, CNBC reported. Nvidia shares, despite results and a forecast that beat analysts' expectations, fell 5.5%, its worst one-day decline since April. This pulled the securities of other representatives of the sector.

- The S&P 500 broad market index was down 0.6 percent on Feb. 26.

- The Nasdaq Composite technology index lost 1.3 percent on Thursday.

- The blue-chip index Dow Jones Industrial Average fluctuated during the day and ended the day virtually unchanged.

- The VIX volatility index, which is called Wall Street's fear indicator, jumped more than 18% during the day - above the psychologically important 20-point mark - but remained at 18.6 by the end of trading.

Shares of Nvidia plummeted 5.5% to $184.9 at the end of trading. For chipmaker it is the worst one-day decline since April, notes CNBC. The company's market capitalization fell by $259 billion during the day, MarketWatch calculated. In terms of losses, this collapse ranks seventh among all U.S. companies: larger one-day declines were previously recorded four times at Nvidia itself, as well as once each at Microsoft and Apple.

Other semiconductor sector stocks - Broadcom, Lam Research, Western Digital and Applied Materials - also fell more than 5% on Feb. 26.

In a report released the day before, Nvidia reported a 73% increase in quarterly revenue - mainly due to demand for the company's AI chips. Revenue for the reporting period, for the whole of last year, as well as sales of the data center segment - all turned out to be record-breaking. In addition, the chipmaker promised that growth in the current quarter would be significantly above Wall Street's average forecast. That should have reassured investors worried about the threat of an AI bubble and the solvency of multi-billion dollar capital expenditures by tech giants. But the market met Nvidia's report and forecast without enthusiasm.

"Nvidia hasn't exactly 'proven' its strength in this reporting," Facet Chief Investment Officer Tom Graff told CNBC, pointing to concerns about the chipmaker's deal with OpenAI, which was announced in September but never concluded. - Nvidia faces both inflated expectations already built into its stock price and a skeptical market." According to Graff, this could mean "uneven momentum" for at least the next few quarters.

Investors didn't buy up Nvidia shares after the report was released because the company's numbers and forecasts rarely disappoint, Fundstrat Global Advisors analyst Hardika Singh explained to Bloomberg. "But where it really fell short was in allaying investor fears about the narrowing 'moat' around its business in the fast-changing world of computing and clearly explaining its strategy for how it will fare in a software apocalypse that could upend industries ranging from cybersecurity to food delivery to banking," Singh said.

Market fears were reinforced by investor Michael Burry, Bloomberg notes. He drew attention to the fact that the volume of Nvidia's purchase obligations reached $95.2 billion against $16.1 billion a year earlier. According to him, this could become a risk if demand for the company's products weakens.

Shares of Salesforce, one of the main victims of the "software apocalypse", rose by 3% at the end of trading. The company's results beat market forecasts, but its revenue outlook for fiscal 2027 disappointed investors. "Salesforce's report was strong, but the weak forecast doesn't help alleviate the depressed sentiment in the software sector," Main Street Research Chief Investment Officer James Demmert told CNBC. He said Salesforce faces a challenging future with the rise of AI, but the fears and the resulting recent industry collapse seems a bit excessive.

The conflicting impressions of the report didn't prevent software stocks from rising. The iShares Expanded Tech-Software Sector ETF, which tracks these companies, added 1% on Feb. 26, although it remains in bearish territory.

Financial sector stocks also traded in the plus, which helped the Dow Jones Industrial Average look better compared to other major indexes, MarketWatch notes . Players in the energy sector and real estate also rose in price. Growth leaders included JPMorgan Chase, Exxon Mobil and CBRE Group.

The news is supplemented.

This article was AI-translated and verified by a human editor