Nvidia (NVDA) closed Friday at $225.32, down 4.42% from the prior session, as a late-week selloff trimmed gains from earlier in the week. Despite the drop, the stock still managed a 4.7% advance for the week, lifted by renewed optimism around artificial intelligence.
The broader market also retreated on Friday. The Nasdaq Composite fell 1.54%, while the Philadelphia Semiconductor Index plunged 4%. Rival chipmakers AMD and Intel also declined, with AMD losing 5.7% and Intel sliding 6.2%.
Investors are now turning their attention to Nvidia's fiscal first-quarter earnings report, scheduled for release on Wednesday, May 20, after the market close. The results are widely viewed as a critical barometer for the AI-driven rally in U.S. equities, given Nvidia's dominant position in the AI chip market.
Nvidia is not just any semiconductor company; it is the world's largest by market capitalization. Its earnings are seen as a gauge for how much major cloud providers—often called hyperscalers—are willing to continue spending on AI data centers. Any sign of slowing demand could rattle the broader tech sector.
Friday's selloff was fueled by rising crude oil prices and higher bond yields, which can pressure high-growth stocks as investors seek safer returns. The S&P 500 slipped 1.24% on the day.
Earlier in the week, Nvidia shares had rallied after a Reuters report indicated that the U.S. government approved sales of its H200 chips—high-end processors designed for AI workloads—to certain Chinese buyers. However, the optimism was tempered by reports that none of the approved Chinese companies, including Alibaba, Tencent, ByteDance, and JD.com, have actually received shipments. Some Chinese firms reportedly pulled back after receiving guidance from Beijing.
Analysts note that AI and energy stocks have been moving in parallel, driven by daily headlines. "AI and energy have been trading on almost parallel tracks," said Allen Bond, portfolio manager at Jensen Investment Management. "Daily headlines can really drive the market."
There are also concerns about the narrowness of the rally. "A smaller set of names are driving index returns," said Patrick Ryan, chief investment strategist at Madison Investments. "Much of the market's move is riding on just a handful of big tech stocks."
Nvidia's earnings report will be as much about its outlook as its past quarter's performance. Investors are focused on whether demand for AI chips and data-center infrastructure remains robust and whether competitors are catching up. "The question is whether Nvidia can defend its leadership position," said Yung-Yu Ma, chief investment strategist at PNC Financial Services Group.
If Nvidia's guidance disappoints, or if cloud customers begin to slow capital expenditures, or if China business fails to materialize despite U.S. approvals, the AI trade could face a significant reassessment. Higher interest rates would only add to the pressure. "The market has been swept up in a momentum AI trade," said Kenny Polcari, chief market strategist at Slatestone Wealth.
Despite Friday's pullback, Nvidia shares remain well above their late-March lows. Traders will be watching Wednesday's numbers closely to determine whether Friday's drop was a mere pause or the beginning of a more volatile phase for AI stocks.
