Nasdaq falls
The Nasdaq Composite fell more than 300 points on Wednesday, after a sudden selloff in AI and chip stocks. Advanced Micro Devices dropped over 15% after its first-quarter forecast fell short of Wall Street expectations. Nvidia slipped more than 3%, Palantir Technologies lost nearly 12%, and Intel declined around 4%. The losses erased billions of dollars in market value in just hours. Trading volume rose sharply across tech stocks, indicating that institutional investors were reducing their positions, not just taking routine profits. In contrast, the Dow Jones Industrial Average rose 265 points.
Reasons behind
Advanced Micro Devices’ weak forecast was the immediate cause of the market drop. Investors interpreted the guidance as a sign that AI spending by large companies may be slowing after rapid growth in 2024. This concern quickly spread to other AI and chip stocks. Nvidia, which powers much of the global AI infrastructure, fell over 3% as traders reconsidered the company’s short-term growth assumptions. Palantir Technologies also lost value despite strong government and enterprise contracts because high investor expectations made it vulnerable to a market shift. Intel faced pressure as investors questioned whether traditional chipmakers can compete with faster rivals in AI technology.
Economic data
Economic indicators added to investor caution. ADP reported that US private payrolls increased by only 22,000 in January, well below the expected 45,000. Manufacturing jobs declined by 8,000, and professional services lost 57,000 positions. The ISM Services Index beat expectations at 53.8 but showed rising costs and falling export orders. This combination of slowing job growth and rising service costs encouraged investors to move money into safer, more stable sectors.
Dow's gains
While tech stocks fell, the Dow’s gains were led by Amgen, which rose more than 6% after reporting strong results, and Caterpillar, which added about 1%.
