Stocks tank on a double whammy of tariff warnings from the Fed and Nvidia

Stocks tanked on Wednesday as investors digested a double whammy of tariff-related warnings from Nvidia and the Federal Reserve.

Here’s where indexes stood at 3:35 p.m. ET. on Wednesday:

Nvidia’s tariff warning

The initial decline on Wednesday was sparked by a surprise disclosure from Nvidia that it expects to take a $5.5 billion hit to earnings in its first quarter.

Nvidia’s massive charge-off stems from its H20 AI chips, which were developed specifically for the Chinese market. Nvidia said the US government imposed export restrictions on the chips, leaving Nvidia holding the inventory with nowhere to sell it.

That news sparked an initial 7% decline in Nvidia shares and dragged the rest of the technology sector lower. The stock extended its decline to as much as 10%, testing the $100 level.

It didn’t help that ASML, a key player in the semiconductor supply chain, reported earnings that missed analyst estimates.

A tariff wake-up call from Jerome Powell

But the losses intensified after Federal Reserve President Jerome Powell spoke at the Economic Club of Chicago.

Powell warned of a “challenging scenario” sparked by the Trump administration’s tariff policies if they are fully enacted.

In this scenario, the Fed’s dual-mandate goals of low unemployment and stable prices “are in tension.”

That could happen if the economy weakens because of the tariffs while prices rise because companies pass the tariff costs along to consumers. In other words, stagflation.

It would mean that while the Fed would be inclined to cut interest rates to help stimulate the economy, it might be handcuffed if inflation is surging.

Powell acknowledged the potential pain ahead for consumers.

“We understand that elevated levels of unemployment or inflation can be damaging and painful for communities, families, and businesses,” he said.