Nvidia ( NVDA ) stock closed off the lows of the session, down almost 2% while Intel ( INTC ) shares cratered over 26% and a broad decline in chip stocks led the tech sector lower as markets tumbled following a weaker-than-expected jobs report .
Following the July jobs report, which showed job growth slowed last month and the unemployment rate reached a nearly three-year high , the Nasdaq slipped into correction territory , defined as a 10% drop from its most recent high.
Chip stocks have been at the center of recent market weakness, and news from Nvidia and Intel on Friday did not help the cause.
Intel results out late Thursday missed on the top and bottom lines as the company also announced a $10 billion cost reduction plan, which includes cutting 15% of its workforce while also suspending its dividend.
Intel's poor quarter followed a cautious forecast from chipmaker Arm Holdings ( ARM ) on Thursday, while Amazon ( AMZN ) offered a revenue and profit warning for the current quarter that sent shares of the ecommerce giant down as much as 12%.
With Nvidia the only one of the "Magnificent Seven" stocks that hasn't reported its latest quarterly results, an emerging theme is that Wall Street's patience with massive AI investments appears to be wearing a little thin.
Hedge fund Elliott Management sent a note to clients saying megacap stocks, especially Nvidia, were in "bubble land," while the technology behind artificial intelligence is "overhyped with many applications not ready for prime time," according to a report from the Financial Times published on Friday.
Additionally, a report from the Information late Thursday said Nvidia faces a potential probe from the Justice Department over antitrust complaints from its rivals, another piece of negative news flow for the challenged chip trade.
Nvidia and other chip stocks are set to end the week in the red after a volatile few days.
The entire sector saw a massive one-day jump on Wednesday after chipmaker AMD ( AMD ) posted better-than-expected guidance and Microsoft ( MSFT ) revealed higher spending on data center infrastructure in its latest quarterly results.
AI chip suppliers like Nvidia stand to benefit from Big Tech's increased investments.
Nvidia rose nearly 13% on Wednesday, buoyed by a bullish note from Morgan Stanley analysts led by Joseph Moore, who moved the stock to a 'Top Pick' after a recent pullback from record highs reached in June.
The movement over the past two days has more than erased Wednesday's gains, and Nvidia closed out the week down almost 6%. The stock is still up more than 100% year to date.
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