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On August 9, Bianniu.com reported that according to Bloomberg, on the surface, Nvidia's market value has shrunk by $900 billion since its record in June, which means that the artificial intelligence spending boom that drove the company's stock price is cooling, but undercurrents show that the situation is far less dire.

Microsoft Corp., Amazon.com Inc., Alphabet Inc. and Meta Platforms Inc. (which together account for more than 40% of Nvidia’s revenue) have all said they will continue to invest billions of dollars in AI infrastructure.

Meanwhile, Super Micro Computer Inc., which makes data-center servers used in AI, told investors it expects sales of $30 billion next year, far exceeding analysts’ expectations.

Yet Nvidia, a major beneficiary of AI spending, has seen its stock price fall 25% in less than two months.

"No one is reducing the numbers, and no one is saying AI is not going well or that we're going to pause AI," said Rhys Williams, chief strategist at Wayve Capital Management LLC. "People are just very nervous."

For weeks, investors have been dumping expensive technology stocks and snapping up everything from small-cap stocks to value stocks, utilities and real estate companies. Last week's weaker-than-expected jobs report further fueled concerns that the U.S. economy could be slowing faster than expected. A report Thursday showing a drop in jobless claims helped ease some of those concerns, prompting stocks to pare recent losses.

Williams said uncertainty in the macroeconomic backdrop could add extra nervousness and have a bigger impact on Nvidia and its peers than quarterly earnings. The decline in stock prices was exacerbated by the unwinding of global carry trades, which many on Wall Street have pointed to as a trigger for the recent increase in market volatility.

Meanwhile, big tech companies have largely failed during earnings season to convince investors that their spending on artificial intelligence will translate into more sales and bigger profits.

“We haven’t seen a way to monetize AI yet, so the return on these expenditures is unclear. The question is, how long can this last?” said Srini Pajjuri, managing director and senior research analyst at Raymond James.

Pajjuri said the lack of catalysts before Nvidia’s earnings report in late August means the outlook for AI chipmakers is unlikely to change in the coming weeks. “That’s going to make it hard to run these stocks right now,” he said.

Nvidia has faced other challenges recently.

Bloomberg reported this week that the company had hit engineering hurdles in developing two new advanced chips, and some investors are concerned that competition could intensify. Many of Nvidia’s biggest customers, including Alphabet and Microsoft, are developing their own chips for AI computing. While those products could take years to be ready, they could grab market share.

Nvidia wasn't the only AI-related company to be hit hard in this massive selloff.

The Philadelphia Semiconductor Index has fallen more than 20% from its July high. Despite a promising outlook, Super Micro Computer Inc. shares fell 20% on Wednesday as investors were disappointed with its gross margin data.

To be sure, Nvidia's stock has doubled this year despite its recent plunge. There are still signs of strong demand for AI chips in the short term, and Wall Street is generally optimistic about the technology.

AMD shares soared in late July after the company reported earnings that included an upbeat revenue forecast citing increased demand for artificial intelligence accelerators.

Perhaps it’s only a matter of time before Nvidia’s halo fades. In mid-June, the company’s stock traded at about 44 times expected earnings, well above the 26 times the Nasdaq 100 index traded at on the same day. After the recent sell-off, the chipmaker’s P/E ratio is about 30—which could make it more attractive to long-term investors again.

"Nothing has fundamentally changed about these companies, other than maybe a little bit of hubris," said Ken Mahoney, president and CEO of Mahoney Asset Management.