Nvidia sell-off after $1.3T drop puts Q2 earnings in focus

Why Nvidia and Micron earnings matter now

The recent pullback in AI-linked semiconductor stocks has put the spotlight back on quarterly earnings delivery, especially from Nvidia and Micron. Goldman Sachs strategist Ben Snider estimated that AI infrastructure stocks will contribute nearly 60% of S&P 500 EPS growth this quarter. The same note highlighted how concentrated earnings leadership has become, with the top 10 contributing stocks expected to account for nearly 75% of total S&P 500 earnings growth in Q2. Micron, Nvidia, Exxon and Broadcom together were expected to account for about 54% of the growth.

That concentration is why a sudden change in sentiment can ripple quickly through the broader market. When the biggest drivers of index-level earnings are also among the most crowded trades, the bar for results and guidance rises. Any disappointment can affect not just individual names, but the sector and index mood.

Tuesday’s tech-led sell-off and the macro trigger

Nvidia and Micron spearheaded a sell-off in the technology sector on Tuesday, according to the information provided. The shift was linked to a risk-averse stance after a hawkish Federal Reserve message that suggested inflation remains too high. The Technology sector ETF (XLK) led the downturn, pulling the Nasdaq Composite lower for a second straight day.

In that session, shares of Nvidia fell about 3%, while Alphabet declined about 1%, extending a broader pullback in Big Tech. Micron, which was set to announce earnings on Wednesday, dropped over 11% as it retreated from peak levels. The weakness was not limited to US names, with SK Hynix and Samsung Electronics also referenced as part of the broader decline in Asia.

Broader chip weakness spreads beyond the leaders

The pullback did not stay confined to the most visible AI bellwethers. The provided context also flagged declines across chip manufacturers, including AMD, Broadcom and Intel. That matters because the AI trade has increasingly been treated as a supply-chain story, spanning GPUs, custom accelerators, networking, and memory.

When investors reduce risk, they often sell baskets rather than single names. That dynamic can push down correlated stocks even when company-specific news is limited. It also means upcoming earnings prints can become “systemic” events for the group.

Cheap forward P/Es: bargain or warning signal?

A separate research view cited by Business Insider argued that low valuations in some leading AI stocks may be less about opportunity and more about fading confidence in the data centre boom. Tom Essaye of Sevens Report Research wrote, as reported, that unusually low valuations across leading AI stocks may reflect growing scepticism rather than a clear entry point.

The logic presented was that if AI stocks trade cheaply despite strong growth narratives, the market may be questioning whether the earnings potential will actually materialise. Essaye also warned that disappointment could lead to “massive order cancellations” across the hardware stack, naming NVDA, MU, AVGO and SNDK in the cited comment.

Valuation and performance snapshot from the cited report

Business Insider provided four examples to illustrate the pattern of large price gains paired with relatively modest forward earnings multiples. Nvidia was cited as up 44% over the past 12 months and trading at 21 times forward earnings. Micron was cited as up 770% and trading at 10 times forward earnings.

Broadcom was cited as up 51%, trading at 24 times forward earnings. SanDisk was cited as up 4,490%, with a forward multiple of 14 times. For context, the S&P 500 as a whole was cited at about 21.5 times forward earnings, leaving some AI-linked names valued similarly to, or below, the broader market despite large run-ups.

A separate episode: $1.3 trillion wiped from chip market value

Reuters was cited describing a dramatic one-day drawdown in chip-linked market value. The AI-driven rally “suffered a massive blow” as the hottest chip companies saw about $1.3 trillion in market value vanish in less than 24 hours. The same report described the deepest one-day drop for the PHLX chip index since March 2020.

In that Reuters-reported move, Nvidia fell 6%, wiping out more than $100 billion from its market capitalisation. Micron fell 13%, erasing roughly $150 billion in value, while Marvell Technology dropped 17%. AMD fell nearly 11%, and Broadcom fell 7.9%, with the report noting Broadcom’s two-day losses were close to 20%.

What Broadcom’s report changed in sentiment

The Reuters account tied the start of the sharp selling to Broadcom’s quarterly report on Thursday (June 4). While Broadcom had been one of the winners of the AI surge, the report said demand for its custom AI chips fell short of Wall Street expectations. That shortfall fed concerns that the AI trade had moved too far ahead of fundamentals.

The report also described how “buy the dip” had become a profitable playbook for more than a year. A break in that pattern can amplify volatility, particularly in sectors dominated by momentum positioning.

Market impact: concentration risk and index-level sensitivity

The provided context repeatedly emphasised how much of the market’s advance has depended on a small set of stocks. One passage stated that almost 80% of the S&P 500’s 11% gain this year is coming from just 10 companies, all in technology, with seven being semiconductor stocks. It also stated that Micron and Nvidia are the two biggest contributors.

That concentration is why earnings from Nvidia and Micron are being treated as key risk events. If results and guidance meet expectations, it can stabilise sentiment in a market where AI infrastructure is driving a large share of earnings growth. If they fall short, the effect can quickly spill into sector ETFs, chip indices, and the Nasdaq.

Key figures mentioned across the reports

What to watch next

The immediate focus is on whether earnings and guidance from key AI supply-chain names can justify expectations embedded in both prices and positioning. Micron was flagged as set to announce earnings on Wednesday, while Nvidia remains central to the broader AI infrastructure narrative. Investors are also watching how macro signals like the Fed’s inflation stance and jobs-related risk-off moves interact with high-valuation, high-expectation sectors.

For markets, the issue is not only whether AI demand is strong, but whether it is strong enough to prevent sentiment-driven drawdowns in a trade that has become increasingly concentrated and crowded.