The New York stock market experienced a sharp downturn on February 27.
U.S. President Donald Trump’s reaffirmed stance on tariffs, which had previously triggered fears of a U.S. economic slowdown and caused Nvidia’s stock to plummet, dragged down the entire AI sector.
Despite gains in four sectors, including energy and finance, all three major indices closed in the red.
The Philadelphia Semiconductor Index (SOXX) plummeted 6%, while the CBOE Volatility Index (VIX), also known as the Wall Street “fear gauge,” surged 11%.
Markets plunge across the board
The New York stock market saw widespread declines, with the Dow Jones Industrial Average, comprising 30 blue-chip stocks, reversing earlier gains.
Tech stocks saw the most significant declines.
The tech-heavy Nasdaq plummeted 530.84 points (2.78%) to close at 18,544.42, falling below the 19,000 mark.
The S&P 500, a broader market gauge, dropped below the 5,900 level, falling 94.49 points (1.59%) to end at 5,861.57.
The Dow fared slightly better, closing down 193.62 points (0.45%) at 43,239.50.
The VIX skyrocketed by 2.03 points (1063%) to 21.13.
Trump sets March 4 for tariff implementation
Trump announced on Truth Social that he would impose a 25% tariff on Mexican and Canadian imports starting March 4.
This came just a day after reports suggested that the imposition was postponed until April 2, after the second administration’s first cabinet meeting, marking a swift reversal.
Without providing evidence, Trump claimed an unacceptable influx of drugs from Canada and Mexico, explaining his intention to go ahead with the tariff plans.
He also revealed plans to impose an additional 10% tariff on Chinese goods and the 10% already implemented since the beginning of his second term.
These new tariffs on Chinese products would result in 20% compared to pre-Trump levels.
Trump stated that retaliatory tariffs would be imposed on countries with non-tariff barriers against U.S. products, starting on April 2.
Additionally, a 25% tariff on steel and aluminum exports to the U.S. will take effect on March 12.
Economic slowdown fears intensify
Concerns about a U.S. economic slowdown deepened on that day.
The Labor Department reported a larger-than-expected increase in new unemployment claims.
New unemployment claims rose to 242,000, surpassing the revised figure from two weeks ago by 22,000.
The market had projected 225,000 claims.
The University of Michigan’s Consumer Sentiment Index and the Conference Board’s Consumer Confidence Index for February indicated declining consumer sentiment, signaling a potential economic slowdown. The labor market also showed signs of cooling.
AI sector collapses
The AI sector experienced a significant sell-off, and some analysts warned that this could start a broader downturn.
Nvidia led the decline.
Despite reporting better-than-expected quarterly earnings after the previous day’s close, investors remained skeptical about Nvidia’s prospects.
There are growing concerns that, due to rising tensions with China’s DeepSeek, the Trump administration could impose tariffs on imported semiconductors and tighten export controls, severely damaging Nvidia’s performance.
During the Biden administration, Nvidia designed lower-performing H20 semiconductors for the Chinese market. Now, it may need to develop even less powerful semiconductors for China.
H20 chips generated between $12 billion and $15 billion in revenue last year, and the potential impact on Nvidia’s China exports is alarming.
If China pivots to developing its own AI chips instead of relying on Nvidia’s lower-performing semiconductors, it could significantly hurt Nvidia’s sales.
Amid these concerns, Nvidia’s stock plummeted from $11.13 (8.48%) to $120.15.
Other AI semiconductor companies also saw steep declines.
Broadcom, specializing in custom AI semiconductors, fell $15.14 (7.11%) to $197.80, while Micron Technology, an AI memory chip producer, dropped $5.89 (6.03%) to $91.82.
The Philadelphia Semiconductor Index (SOXX) plunged 304.07 points (6.09%) to 4,686.75.
AI server manufacturers weren’t spared, either.
Supermicro Computer (SMCI), which had surged 12% the previous day after shedding bankruptcy concerns, crashed $8.16 (15.97%) to $42.95.
Dell Technologies’s share price fell $7.82 (6.76%) to $107.83, while HPE’s share price fell $0.53 (2.60%) to $19.84.
Tesla drops 3%
As Nvidia tumbled 8%, other M7 tech stocks also saw significant losses.
Tesla fell $8.85 (3.04%) to $281.95, while Alphabet dropped $4.23 (2.45%) to $168.50.
Meta Platforms declined $15.46 (2.29%) to $658.24, and Amazon closed down $5.61 (2.62%) at $208.74.
Apple and Microsoft fared slightly better, with 1.27% and 1.80% losses, respectively.
Oil prices surge on Trump’s tariff announcement
Global oil prices spiked in response to Trump’s tariff announcements.
The U.S. imports 4 million barrels of oil daily from Canada and 400,000 barrels from Mexico, meaning that tariffs would likely increase oil prices.
International oil prices rebounded after three days of declines.
Brent crude oil, the global benchmark, rose $1.51 (2.08%) to $74.04 per barrel for April delivery.
West Texas Intermediate (WTI), the U.S. benchmark, surged $1.73 (2.52%) to close at $70.35 per barrel.
