Nvidia (NVDA) shares edged lower by 1.1% to $212.60 on Wednesday, trimming its market capitalization to roughly $5.19 trillion. The decline came as the broader semiconductor sector took a breather following a recent rally that had pushed the S&P 500 and Nasdaq to record closing highs.
The Philadelphia SE Semiconductor Index dropped 1.4%, snapping a streak of gains. Other chipmakers also retreated: Qualcomm fell 6%, Marvell Technology lost 4.6%, and Intel gave up 1.4%. Traders described the pullback as a natural pause after a sharp run-up rather than a sign of panic. “After such a large run-up in the markets, it’s not surprising to me that there is a little bit of a pause,” said Sean Clark, chief investment officer at Clark Capital Management Group.
Nvidia remains the primary barometer for the artificial intelligence trade, reflecting corporate spending on chips and server infrastructure for AI software. The company’s fundamentals continue to look solid. Last week, Nvidia reported first-quarter revenue of $81.6 billion, up 85% year-over-year. Data center revenue, which includes server farms used to train and run AI systems, surged 92% to $75.2 billion.
The company also authorized an additional $80 billion for share buybacks and raised its quarterly dividend from 1 cent to 25 cents. While buybacks can boost earnings per share by reducing the share count, they do not eliminate underlying business risks.
CEO Jensen Huang emphasized strong demand for what Nvidia calls “AI factories”—large computing centers dedicated to generating AI results. “Agentic AI has arrived,” Huang said, referring to software designed to perform tasks autonomously. Nvidia guided for second-quarter revenue of $91.0 billion, plus or minus 2%, though the forecast assumes no data center compute sales from China, leaving trade policy as a key variable for investors.
China remains the biggest wild card. Nvidia received U.S. licenses to sell its H200 chips to China, but has not yet secured Chinese clearance and has not shipped any chips. “The Chinese market is very important,” Huang said during a talk in Taipei. The risks are clear: export controls could tighten, China could delay approvals, or investors could sour on AI if the trade becomes too crowded. “Stretched momentum conditions and elevated positioning” are putting the durability of the rally into question, said Adam Turnquist, chief technical strategist at LPL Financial.
Adding to the uncertainty, Taiwan prosecutors suspect that Nvidia chips may have been smuggled into China via Japan, according to a Bloomberg report. Reuters could not independently verify the claim. Huang said Nvidia takes chip diversion risk in Taiwan seriously and is “very rigorous” about ensuring partners comply with legal requirements.
For now, the market does not view Nvidia as broken. The stock is seen as crowded and priced at a premium that leaves room for doubt, but it remains a must-own for investors betting on the ongoing AI boom. Traders will watch Thursday’s open to see if Wednesday’s slip was merely a pause or the start of a deeper correction.
