Tech stocks retreated Wednesday, with declines in Nvidia and other chip companies dragging the Nasdaq composite to its worst day in almost a month.
Driving the moves: concerns about high valuations and additional regulation. On Tuesday, the Trump administration said Nvidia must meet new security requirements before sending H200 artificial-intelligence chips to China. Meanwhile, Florida Gov. Ron DeSantis reiterated plans for consumer protection rules on artificial intelligence.
Broadcom and Arm Holdings lost 4.2% and 2.6% respectively. Nvidia fell 1.4%, and the Nasdaq dropped 1% to notch its worst one-day drop since Dec. 17. Tech firms’ ambitious plans for blowout spending on artificial intelligence infrastructure had already been making some investors skittish over the past couple of months.
“I would argue that tech stocks are no longer a safe haven,” said Jay Hatfield, chief executive officer at Infrastructure Capital Advisors. “They’ve been a safe haven since the pandemic but that’s not normal.”
The S&P 500 and Dow Jones Industrial Average both fell less than the Nasdaq, losing 0.5% and less than 0.1% respectively, in another example of the so-called rotation trade that has powered recent market moves. Investors’ growing sense of optimism about the economy, and their more-cautious view of the artificial-intelligence build-out, have spurred a shift away from some of the recent tech highfliers and into stocks poised to benefit from a reacceleration in growth.
Shares of consumer staples companies, healthcare providers, and energy companies edged upward. The equal weighted S&P 500 gained 0.4%.
“We don’t need the Magnificent Seven to carry the market anymore,” said Michael Antonelli, market strategist at Baird, referring to the nickname for the group of Amazon.com, Alphabet, Apple, Meta Platforms, Microsoft, Nvidia and Tesla—top performers that have driven stock gains in recent years.
Still, consumer discretionary stocks fell, with the group losing 1.8% to lead declines in the S&P 500. Travel stocks took a particular blow, with Airbnb losing 5.2% and Expedia falling 3.1%. Cruise operators Royal Caribbean, Norwegian Cruise Line Holdings and Carnival all declined more than 2.5%.
Bank shares also took a hit, after new earnings reports from major lenders. Wells Fargo stock fell 4.6% after the lender posted disappointing net income per share. Shares in Bank of America fell too, even after consumer spending led to a 12% rise in quarterly profit. Citi stock also retreated after the bank’s quarterly profit was hit by a $1.2 billion loss from the announced sale of its Russia operations.
President Trump’s proposed 10% cap on credit-card interest rates also weighed on banks and credit card firms, said Joseph Brusuelas, chief economist at RSM. Financial shares in the S&P 500 lost 0.2%.
Gold and silver futures both hit new highs, boosted by geopolitical tensions. Oil futures extended gains made Tuesday, which came after Trump appeared to hint at the U.S. intervening in Iran’s upheaval, before retreating in after-hours trading.
New data showed retail sales grew 0.6% in November, an unexpectedly sharp jump, while wholesale inflation was cooler than expected for that month, at 0.2%. Home sales rose in December at their fastest pace in nearly two years.
In Asia, Japan’s Nikkei 225 hit another all-time high, and bond yields continued to rise. The country’s prime minister has called a snap election. South Korea’s Kospi composite also hit a record.
Write to Heather Gillers at heather.gillers@wsj.com