Why Nvidia Stock Is Sinking Today

Nvidia (NASDAQ: NVDA) stock is getting hit with sell-offs in Thursday's trading. The company's share price was down 5.1% as of 2 p.m. ET amid a 2% decline for the S&P 500 and a 2.5% decline for the Nasdaq Composite.

Investors are selling out of artificial intelligence (AI) and semiconductor stocks today after Marvell Technology saw a big valuation pullback despite posting better-than-expected Q4 results and guidance. The negative reaction to Marvell's earnings report has spurred sell-offs for AI stocks, and Nvidia's share price is taking a hit as investors signal the need for higher growth to support valuation levels amid macroeconomic and geopolitical risk factors.

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Nvidia stock falls after Marvell plummets despite a solid Q4 report

Marvell's non-GAAP (adjusted) earnings per share of $0.60 in the fourth quarter topped Wall Street's call for per-share earnings of $0.59, and sales of $1.82 billion exceeded the average analyst forecast by $20 million. But investors weren't satisfied with annual growth of approximately 27% for sales and 33% for adjusted earnings.

Marvell's guidance also wasn't hot enough to support bullish sentiment despite beating the average Wall Street forecast. The chip specialist targeted revenue of approximately $1.875 billion, which beat the consensus forecast for sales of $1.87 billion. Management's guidance for an adjusted gross margin of 60% suggests that earnings should be strong in the period, but the outlook wasn't enough to prevent big sell-offs for Marvell -- and the pullback is extending to Nvidia and other AI stocks.

Why is the market's reaction to Marvell's results bearish for Nvidia?

Marvell is a leading provider of connectivity chips and other solutions that have been seeing demand tailwinds in conjunction with the rise of AI. As a result, the company's performance has come to be viewed as an indicator for overall demand trends in the artificial intelligence space.

While the company's recent fourth-quarter report points to a strong near-term outlook, the market's reaction to its Q4 performance and forward guidance suggests that investors are feeling more cautious about valuations for AI stocks -- and that's weighing on Nvidia's share price.

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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool recommends Marvell Technology. The Motley Fool has a disclosure policy.