Nvidia (NVDA -9.12%) stock is getting hit hard in Tuesday’s trading. The semiconductor company’s share price was down 8.7% as of 2:15 p.m. ET, according to data from S&P Global Market Intelligence.
The artificial intelligence (AI) leader’s share price is falling in response to rising concerns about the health of the U.S. economy. News out of China and other geopolitical dynamics are also prompting sell-offs for Nvidia and other chip stocks today.
Investors are feeling jittery ahead of this week’s jobs report
The U.S. Department of Labor is expected to release its latest employment data on Friday, and Wall Street is seeing an uptick in bearish sentiment ahead of the report. Investors have been looking forward to interest-rate cuts that are expected to be delivered by the Federal Reserve this month, and the rate reduction could be larger than many analysts initially expected. But there’s a catch.
Some analysts now expect that the Fed will cut interest rates by a full point this year. If so, that could be a sign that the central banking authority believes the economy is on track for a recession. Investors are bracing for a worrying jobs report at the end of this week, and Nvidia and other high-profile growth stocks are seeing big valuation pullbacks.
Concerns that China will invade Taiwan hit chip stocks, again
In an interview on Sunday, Taiwanese President Lai Ching-te said that China should also move to reclaim land from Russia if it wants to officially make Taiwan its territory. Rather than suggesting that China should take back Russian land that used to be within its own borders, Lai was making a statement about whether the Chinese government was being logically consistent in some of its stated reasons for plans to exert greater control over Taiwan. Nevertheless, it looks like the comments from Taiwan’s president are highlighting the risk that China could invade Taiwan at some point in the not-too-distant future.
While the Chinese government has long made claims that Taiwan is already part of its territory, the contention has taken on added importance in light of the crucial role that Taiwan plays in semiconductor manufacturing and artificial intelligence trends. The island nation is home to Taiwan Semiconductor Manufacturing — the leading contract manufacturer of semiconductors that’s responsible for the fabrication of advanced chips for AI applications. Nvidia relies on TSMC for the fabrication of its chips, and any disruptions to the fab leader’s output could have major implications for the company’s performance.
Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.