Stocks close lower as Nvidia weighs ahead of earnings
By Chuck Mikolajczak
NEW YORK (Reuters) -U.S. stocks ended lower on Tuesday, with the Nasdaq showing the largest declines as chipmaker Nvidia (NASDAQ:NVDA) stumbled ahead of its highly awaited earnings report, while gains in Walmart (NYSE:WMT) kept losses on the Dow Industrials in check.
Shares of the chip designer Nvidia tumbled 4.35%, it's biggest daily percentage fall since Oct. 17, while the broader Philadelphia semiconductor index declined 1.56% as other chip stocks followed.
Investors are concerned whether Nvidia's quarterly results, expected after markets close on Wednesday, will justify its expensive valuation, currently at a forward price-to-earnings ratio of just over 32, and continue to fuel the buying frenzy around artificial intelligence (AI) related stocks.
AI-fueled bets have helped Nvidia become the third-most valuable U.S. company and recently supplant Tesla (NASDAQ:TSLA) as Wall Street's most traded stock.
«It is priced to perfection, no matter what they say they are probably going to take money out of it,» said Ken Polcari, managing partner at Kace Capital Advisors in Boca Raton, Florida.
«No matter what they say, the traders are going to lock in profits, the asset managers are going to peel off a piece of their core position and lock in some profits and some of that is even happening today ahead of the number tomorrow.»
Shares in Super Micro Computer (NASDAQ:SMCI), which has surged in recent weeks as the latest stock seen to benefit from AI, fell 1.96%, its second straight decline, after closing down nearly 20% on Friday to snap a nine-session streak of gains.
The S&P 500 lost 30.06 points, or 0.60%, to end at 4,975.51 points, while the Nasdaq Composite lost 144.87 points, or 0.92%, to 15,630.78.
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