Wall St closes lower as Nvidia tumbles following report

The S&P 500 and Nasdaq have ended sharply lower, weighed down by a slump in chipmaker Nvidia after its quarterly report failed to rekindle Wall Street's AI rally, while investors focused on data pointing to a cooling US economy.

Nvidia tumbled 8.5 per cent, evaporating $US274 billion ($A439 billion) in stock market value, after the Silicon Valley company gave a weaker-than-expected quarterly forecast for gross margin that overshadowed an upbeat revenue outlook.

Chipmakers Broadcom dropped more than 7 per cent and Advanced Micro Devices lost 5 per cent, pulling the Philadelphia chip index down 6.1 per cent.

The launch of low-cost artificial intelligence models from China's DeepSeek in January has cooled Wall Street's AI rally, while an analyst report this week suggesting Microsoft was scrapping some data centre leases also raised concerns of AI overcapacity.

With Nvidia's results and outlook failing to impress investors with high expectations, its stock has now fallen almost 20 per cent from its record-high close on January 6.

"Nvidia's earnings were good, but not like the blockbuster earnings that they've been delivering for a while," said Scott Welch, chief investment officer at Certuity.

The S&P 500 dropped 1.59 per cent to end the session at 5,861.57 points on Thursday.

The Nasdaq tumbled 2.78 per cent to 18,544.42 points, while the Dow Jones Industrial Average declined 0.45 per cent to 43,239.50 points.

It was the Nasdaq's deepest one-day percentage drop in a month.

Volume on US exchanges was heavy, with 15.8 billion shares traded, compared to an average of 15.3 billion shares over the previous 20 sessions.

While tech stocks dipped, other parts of the market saw gains. The S&P energy index rose 0.5 per cent, tracking a jump in crude prices after US President Donald Trump cancelled oil major Chevron's licence to operate in Venezuela.

Also weighing on investor sentiment, data showed jobless claims jumped more than expected in the previous week, while another report reiterated that economic growth slowed in the fourth quarter.

Thursday's data follows reports over the past week that suggested the economy was stalling, fears of which have also put all three major US indexes on track for monthly declines.

"We're now seeing inflation fears give way to growth fears, and that, in turn, is causing stocks to go, at best, sideways, and potentially even down," said Michael Green, chief strategist at Simplify Asset Management in Philadelphia.

On the trade front, Trump floated a 25 per cent reciprocal tariff on European cars and other goods. He also said tariffs on Mexico and Canada will go into effect on Tuesday.

Investors are focused on monthly Personal Consumption Expenditure data, which is the Federal Reserve's preferred inflation gauge, due on Friday.

Traders expect the Fed to lower borrowing costs by at least 50 basis points by December, according to data compiled by LSEG.

Shares of Salesforce dropped 4 per cent after the business software seller forecast fiscal 2026 revenue below expectations.

Snowflake surged 4.5 per cent after the data analytics provider forecast fiscal 2026 product revenue above estimates.

Viatris plummeted 15 per cent after the drugmaker forecast downbeat annual results.

Warner Bros Discovery jumped 4.8 per cent after saying it expects streaming profits to double this year.

Declining stocks outnumbered rising ones within the S&P 500 by a 1.7-to-one ratio. The S&P 500 posted 20 new highs and 13 new lows; the Nasdaq recorded 42 new highs and 269 new lows.