What happened

Shares of semiconductor maker Nvidia (NVDA 4.49%) were dropping today ahead of the fiscal 2023 third-quarter earnings it will report after the closing bell on Wednesday. Nvidia shares fell nearly 5% earlier in the day, and were still lower by 3.4% as of 2:41 p.m. ET. 

So what

The drop isn't just due to the uncertainty surrounding that earnings report, though. The semiconductor sector overall is in the red today after Micron Technology announced that weaker demand has reduced its chip production plans by 20%. Investors might also be unsure what to expect from Nvidia later today, and some of the selling could be due to thinking that the more than 40% rise in its shares over the last month was too much, too fast. 

Now what

Expectations are mixed for Nvidia, partly due to the previously announced license requirements imposed by the U.S. government that restrict some semiconductor chips from being sold in China. Nvidia initially said that could hurt sales in its quarterly period ended Oct. 31, 2022, by as much as $400 million. 

But Nvidia could exceed expectations since earlier this month it introduced its new A800 data center offering that isn't limited by the U.S. export restrictions. The company said the new chip went into production in its third quarter. 

Nvidia also announced a new partnership with Microsoft today that it might expound upon in its report tonight. The multiyear project will be "to build one of the most powerful AI supercomputers in the world," according to the company. It will combine Microsoft's cloud computing infrastructure with Nvidia's graphics, networking, and artificial intelligence (AI) software to help businesses expand AI technologies. 

Investors are selling Nvidia shares today after Micron's announcement, but some might also be guessing what the company will say about its China business after the bell today. That's not a way to invest for the long term, but some may just feel it prudent to take some money off the table after the stock's sharp rise over the last month.