Semiconductor heavyweights Nvidia, AMD, and Intel saw their shares decline in Tuesday's premarket trading, as a sharp rise in long-term Treasury yields prompted investors to reassess richly valued technology stocks. Nvidia slipped more than 2%, while AMD, Intel, and Marvell fell between 2.6% and 4.8%. Nasdaq 100 futures were down 1.17% at 4:50 a.m. ET.
The immediate catalyst appears macroeconomic rather than a sudden deterioration in AI spending. The 30-year Treasury yield reached 5.327%, its highest level since 2007, while fading hopes for a US-Iran settlement kept oil prices elevated and revived inflation concerns. Higher government yields reduce the present value of future profits and raise corporate borrowing costs, creating a particularly uncomfortable backdrop for technology companies that have surged on expectations of continued AI infrastructure growth.
When investors demand a higher return for taking risk, even well-positioned chipmakers can see their shares fall without company-specific bad news. Nvidia and Tesla led the decline among growth stocks on Tuesday, with Meta, Microsoft, and Alphabet also trading lower. The broad nature of the selloff suggests a valuation and risk reset rather than a sudden collapse in semiconductor demand.
AMD's high bar
AMD provides a clear example of the second challenge facing the chip trade: good results are no longer always enough. The company recently forecast third-quarter revenue of about $13 billion, above Wall Street's $12.52 billion estimate, and CEO Lisa Su said data-centre revenue should more than double by 2027. Yet AMD shares dropped sharply after the results.
Bernstein analyst Stacy Rasgon told Reuters, “We suspect expectations had moved higher following Intel's results a couple of weeks ago, and the buyside already has a fairly bullish outlook.” TD Cowen analysts noted that AMD faced a “very high bar” even though the results and guidance were solid. This dynamic underscores that investors are increasingly paying for continued acceleration rather than merely strong demand.
Nvidia and Intel show resilience
Despite the market's jitters, the fundamental counterargument remains substantial. Nvidia announced this month that it is working with Apollo, BlackRock, Blackstone, Brookfield, Goldman Sachs, and KKR on platforms intended to mobilise more than $500 billion of third-party capital for AI infrastructure. Raymond James analyst Simon Leopold maintained a Strong Buy rating and $330 target, arguing that additional financing could extend the AI boom. Bank of America's Vivek Arya kept a $350 target and said the structure shifts much of the financing burden away from Nvidia.
Intel's recent results also point to resilient demand. Its second-quarter Data Center and AI revenue reached $6.26 billion, beating the $5.37 billion analyst estimate, while third-quarter revenue guidance exceeded expectations. Futurum Group strategist Shay Boloor said that Intel could keep rerating if it turns current data-centre shortages into sustained growth while improving foundry economics.
For investors, the key takeaway is that AI-driven demand remains intact, but the market's tolerance for high valuations is being tested by rising yields. As Wall Street slides on Iran tensions and oil surge, the pressure on growth stocks could persist. Meanwhile, Nvidia's $500B AI funding plan highlights the scale of capital flowing into AI infrastructure, but also raises questions about leverage and sustainability.
With UBS projecting Nvidia's Q3 revenue could top $110B, the fundamental outlook remains strong. However, as Microsoft shares slide on AI chip deployment concerns, investors are becoming more selective. The AI chip trade is not cracking, but it is undergoing a necessary recalibration.
This article is for informational purposes only and does not constitute financial advice.
