Nvidia (NVDA) shares declined approximately 2% on Wednesday, extending a recent downturn in semiconductor stocks as investors grappled with escalating geopolitical risks, a sharp rise in oil prices, and mounting questions about the long-term returns on artificial intelligence investments. The stock traded near $192, remaining below the psychologically significant $200 level.
Broader market under pressure
The broader equity market also faced headwinds, with oil prices surging ahead of the Federal Reserve's latest interest rate decision. The Dow Jones Industrial Average dropped 853 points, or 1.6%, while the S&P 500 fell 0.9%. The Nasdaq Composite declined 1.2%.
Semiconductor stocks were hit particularly hard, with the iShares Semiconductor ETF (SOXX) falling more than 4%. The sector has now lost roughly 10% over the past four trading sessions as investors reassess the profitability of heavy AI infrastructure spending and monitor increasing competition from Chinese chipmakers. Micron Technology dropped 5%, and Advanced Micro Devices also slid more than 5%.
Geopolitical tensions and oil spike
The latest market weakness coincided with another sharp increase in oil prices after President Donald Trump told Fox News that the United States would strike Iran "hard" following surprise attacks. West Texas Intermediate crude futures climbed 6.9% to $89.88 a barrel, adding to inflationary concerns and weighing on risk appetite.
Big Tech earnings in focus
Investor attention is now shifting to quarterly earnings reports from Microsoft, Meta Platforms, and Amazon, which are expected to provide fresh insight into the pace of AI investment. Capital expenditure guidance from these hyperscale technology companies will be closely watched as a leading indicator of future demand for Nvidia's graphics processing units.
Analysts will also look for commentary on AI hardware procurement, as major tech firms continue developing custom processors with partners such as Broadcom for specific workloads. While custom chips are generally designed to complement rather than replace Nvidia's GPUs, investors are assessing whether broader adoption could gradually reduce reliance on third-party suppliers. The earnings reports are expected to help determine whether hyperscale companies intend to maintain their current pace of AI infrastructure investment.
For more context on the recent selloff, see our earlier coverage of Nvidia slipping 3% as $750B AI financing deals spark sustainability concerns and Micron, Nvidia, AMD sliding premarket on China chip fears and AI financing doubts.
ARK Invest buys the dip
Despite the recent selloff, Cathie Wood's ARK Invest added to its Nvidia position. The firm's flagship ARK Innovation ETF purchased 78,965 Nvidia shares on Tuesday, valued at approximately $15.5 million. The purchase came a day after Nvidia fell 5% amid investor concerns surrounding more than $750 billion of reported AI infrastructure financing initiatives involving OpenAI and other partners. ARK also added shares of Tesla and Intuitive Machines during Tuesday's trading session.
The purchase reflects ARK's strategy of increasing positions following sharp share price declines, even as the broader market continues to debate whether elevated AI infrastructure spending will generate sufficient long-term returns to justify current investment levels. For a deeper dive into the AI infrastructure boom, read our analysis of Nvidia's $250B OpenAI guarantee signaling an extended AI infrastructure boom.
This article is for informational purposes only and does not constitute financial advice.
