Concerns about a potential bubble in the artificial intelligence sector emerged again on Thursday as major U.S. stock markets declined, just a day after chipmaker Nvidia’s impressive results had sparked a market rally.

Initially, Wall Street experienced a boost following Nvidia’s reassurance of robust demand for its advanced data center chips. However, this optimism faded as the tech stocks central to the AI boom began to face downward pressure.

In New York, the S&P 500 index ended the day down 1.6%, while the Dow Jones Industrial Average fell by 0.8%. The tech-focused Nasdaq Composite Index dropped by 2.2%.

Earlier in the session, the FTSE 100 rose by 0.2% in London, and the DAX closed 0.5% higher in Frankfurt. The Nikkei Stock Average increased by 2.65% in Tokyo.

Currently valued at approximately $4.4 trillion, Nvidia has seen an extraordinary surge in valuations among AI-related companies in recent months. The escalating concerns about a bubble have arisen as businesses invest heavily in chips and data centers to secure their position in the AI market.

Nvidia continues to experience strong demand, with highly anticipated earnings surpassing expectations on Wednesday. Yet, worries persist that companies utilizing these chips and investing in AI are making substantial expenditures to stimulate demand.

“The sale of semiconductors to support AI doesn’t mitigate fears that some hyperscalers might be overspending on AI infrastructure,” remarked Robert Pavlik, senior portfolio manager at Dakota Wealth. “While certain companies are turning a profit, many are still investing heavily.”

Mixed employment data released Thursday morning highlighted robust labor market growth in September, albeit with a slight uptick in the unemployment rate, reinforcing the expectation that Federal Reserve policymakers may choose to maintain interest rates at their upcoming December meeting.

Nvidia’s stock saw a decline of 3.2%, while the VIX index, which gauges market volatility, increased by 8%.

Report contributed by Reuters