Stocks dropped Wednesday as a strong warning from Nvidia rocked the global tech industry, and worried investors were alarmed by Fed Chair Jerome Powell’s fears about the economic effects of tariffs.

The information technology industry was the main driver of the S&P 500’s 2.24% decline, which ended at 5,275.70. The Nasdaq Composite closed at 16,307.16 after reversing 3.07%. The tech-heavy index moved closer to bear market territory as it closed the day almost 19% below its closing high.

Following the announcement that the chip company would report a $5.5 billion penalty each quarter due to exporting its H20 graphics cards to China and other countries, Nvidia’s shares fell 6.9%. In a filing, the business stated that in order to export chips to China, the U.S. government needed a license.

The New York Times’ allegation that the president’s government was taking action against DeepSeek, a Chinese business that uses Nvidia chips, also put pressure on the stock. Following Nvidia’s decline, other chip makers had a decline of over 4% in the VanEck Semiconductor ETF (SMH). While Micron Technology declined 2.4%, AMD plunged 7.4%. A dismal earnings announcement from ASML, whose shares traded in the United States, fell 7%, contributing to the overall decrease in chips.

As each index recovered from heavier losses in the last half hour of trading, the Dow Jones Industrial Average down 1.7%, or 700 points, while the tech-heavy Nasdaq Composite and the S&P 500 fell 2.2% and 3.1%, respectively. Following a tumultuous initial period of trading driven by worries about tariffs and a potential global trade war, particularly the rising tensions between the U.S. and China, the major indices were recovering from slight falls on Tuesday, which was a comparatively tranquil session.

Powell stated at a Chicago event at noon that tariffs are likely to increase inflation and delay growth. Additionally, he cited a precipitous drop in business and consumer mood brought on by the global trade practices of the Trump administration. Powell reaffirmed that the Fed is well-positioned to hold off on raising interest rates until more information about the effects of tariffs is available. Even though stocks were already down significantly this morning, they continued to decline while Powell spoke.

Markets React to Tariff Concerns

In the afternoon, stocks fell to session lows following Fed Chair Powell’s statement that the central bank may face difficulties as a result of Trump’s policies. In a Q&A session, Powell stated such levies are “likely to move us further away from our goals” and could short-term increase inflation.

Trump’s announcement earlier this month of penalties on other nations has shaken financial markets. China was not included in the 90-day suspension on some of the duties that were placed last week. Over the weekend, Trump declared that imports of PCs and smartphones would not be subject to tariffs, but he later made it clear that this exemption would only last temporarily.