Nvidia Drags Tech Stocks Lower

The Santa Clara-based chipmaker fell 30.7 percent after lowering its quarterly forecast due to strong competition and weaker demand. It lost nearly $6 in active trading to close at $12.49.

Nvidia said on Wednesday it expects second quarter revenue to range between $875 million and $950 million, with gross margin to be lower than internal expectations. The revenue forecast was below the average analyst estimate of $1.01 billion.

The company "clearly made a poor design decision in the not too distant past, in our opinion, which ultimately led in a price/performance gap large enough to warrant significant price cuts ultimately resulting in the pre-announcement," Wedbush Morgan analyst Patrick Wang told clients.

Nvidia also said it would take a charge of $150 million to $200 million in its second quarter to cover anticipated warranty, repair and return costs associated with a defect on some of its chips.

The Philadelphia Semiconductor Index fell about 1 percent as Intel Corp. lost 1.3 percent and Advanced Micro Devices declined 2.6 percent.

The broader market picked up notable gains in the morning, as a government report on unemployment was not as bleak as some had feared. The Dow picked up 73 points.