Nvidia falls 1.8% despite Huang saying chip orders outpace supply

How much did Nvidia shares fall?

Nvidia (Nasdaq: NVDA) shares slid 1.8% on Thursday and closed at $217.23. They had ended the previous session at $221.30.

Why it matters: The company lost $98 billion in market value, leaving it worth $5.2 trillion. Shares worth $28 billion changed hands during the session.

By the numbers: The drop stood out on a broadly positive day. The S&P 500 rose 0.3% and the Dow gained 1.1%. The Nasdaq-100, which leans heavily on technology companies, edged down 0.1%.

Across the market, 1,060 stocks rose and 358 fell. The technology sector fund dropped 0.7%.

Why are chip stocks under pressure?

Investors are questioning how buyers of AI chips will pay for their spending. Many AI companies are borrowing heavily to build data centers. Reports said U.S. chip stocks have lost a large amount of market value over recent sessions.

CoreWeave, a cloud provider backed by Nvidia, has become a focus of that concern. It carries heavy debt, and yields on some of its bonds have climbed steeply. A bond yield is the return buyers demand, and a higher yield points to more perceived risk.

Nvidia owns a stake in CoreWeave. It has also agreed to buy computing capacity that CoreWeave cannot sell elsewhere. That ties Nvidia's finances more closely to the industry's borrowing. CoreWeave reported a large revenue backlog at the end of June.

What did Jensen Huang say about demand?

Huang said customers keep ordering more AI chips than Nvidia can supply. In a podcast interview released Thursday, he said new orders arrive almost daily. "We keep increasing more supply and the order books keeps going up," Huang said.

He said large cloud providers, newer AI cloud operators and equipment makers have placed big orders. Customers plan their needs well in advance, he said. Nvidia is giving them less capacity than they want.

Huang said power shortages, unfinished data centers and parts supply are slowing how fast Nvidia can expand. He rejected the view that leading AI labs such as OpenAI and Anthropic would require enormous revenue to justify the spending. "People misunderstand what's going on," he said.

Huang said those labs account for only part of Nvidia's computing activity. The rest comes from conventional computing, startups and specialized applications. Taiwan Semiconductor Manufacturing, Nvidia's main chipmaker, reported a large jump in quarterly profit.

What comes next for Nvidia and chip stocks?

What’s next: The open question is whether AI companies can earn enough to cover their borrowing. Huang told Bloomberg that CoreWeave did not require extra financial support. "CoreWeave's strength is improving every day," he said.

Borrowing costs eased on Thursday. That may help companies that fund data centers with debt, since Treasury yields help set many loan rates. The 10-year Treasury yield fell 9 basis points to 5.10%.

The next scheduled checkpoint for interest rates is the Federal Reserve's decision on Oct. 28 at 2 p.m. ET. Rates matter for those borrowers. The government's early estimate of economic growth follows on Oct. 29 at 8:30 a.m. ET.