Ines Ferre – September 7, 2019

Nvidia Corporation (NVDA) witnessed a 4% decline in its stock price on Friday, contributing to the overall market sell-off led by the semiconductor sector. This downturn marked the end of a turbulent first week of September. The technology (XLK) stocks took a hit following the release of the August jobs report, which revealed a drop in the unemployment rate to 4.2% from 4.3% the previous month. Analysts predict that the Federal Reserve may cut rates by 25 basis points instead of the anticipated 50 basis points at its upcoming policy meeting. The news cast doubt on the prospects for tech infrastructure spending and raised concerns about the AI stock boom reaching its peak.

Peter Tchir, the Head of Macro Strategy at Academy Securities, suggested that investors may not receive the support they were expecting from the Federal Reserve. Uncertainty still lingers regarding the direction of tech spending, as the economy shows signs of stability but lacks significant growth. These factors contributed to the decline in technology stocks, which are typically favored during a period of interest rate cuts.

Nvidia had been driving the market's impressive performance with its stellar growth streak this year. However, the company failed to sustain the rebound experienced in late August after a lackluster response to its quarterly results. As a result, Nvidia's shares have dropped approximately 13% over the past four trading sessions.

Another notable decline in the semiconductor sector was witnessed in the shares of Broadcom (AVGO), which sank by 10%. While the company reported better-than-expected earnings, its disappointing sales forecast for the fourth quarter overshadowed the positive results. Additionally, the demand for AI chips surged, but spending on broadband remained sluggish. Daniel Newman, CEO of the Futurum Group, highlighted that the situation reflects a story of business diversification, with the core business experiencing a slight slowdown but the potential for improvement in the coming quarters.

Moreover, chip manufacturing equipment provider ASML (ASML) experienced a 5% drop in its stock price after the Dutch government announced stricter export controls on advanced chip manufacturing equipment due to national security concerns. This development prompted Morgan Stanley to remove ASML as a "Top Pick" for European semiconductors and slightly lower its price target.

The overall market downturn affected chip stocks significantly, resulting in Nvidia recording the 5% drop in its stock price on Friday. These recent developments have raised questions regarding the future performance of the semiconductor industry and its impact on the broader market.

Ines Ferre is a senior business reporter for Yahoo Finance.