Intel (INTC -0.70%) stock was gaining ground early in Thursday's trading, but traded lower later in the day. The semiconductor specialist's share price was down 1% as of 3:45 p.m. ET along with a 1.3% decline for the S&P 500 index and a 2.3% decline for the Nasdaq Composite index. The stock had been up as much as 3.7% earlier in the day.

Investors were optimistic following reports that the Trump administration is encouraging Taiwan Semiconductor Manufacturing (NYSE: TSM) to acquire the company's chip-fabrication unit.

Intel stock initially rose

The Trump administration is reportedly promoting a deal that would see TSMC either buy Intel's foundry business or partner with the company to run the unit. TSMC is the world's leading manufacturer of high-performance semiconductors and has been eyed as a potential buyer for Intel's struggling chip fabrication unit. Intel's fab business has been racking up massive losses and missing key performance milestones, but it still represents an important national resource for the U.S. 

Optimistic investors were apparently betting that a deal could move forward in the not-too-distant future and unlock value for Intel shareholders.

But Intel lost its gains as the market turned bearish on Nvidia

But then other emotions caught up with investors. Nvidia reported its fourth-quarter earnings results last evening, posting earnings per share of $0.89 on revenue of $39.33 billion -- beating the average analyst estimate's call for per-share earnings of $0.84 on sales of $38.05 billion. The artificial intelligence (AI) giant also guided for sales of $43 billion in the current quarter, beating the previous consensus estimate for sales of $41.78 billion.

But despite the strong Q4 numbers and guidance, investors turned bearish on Nvidia due to valuation concerns. The bearish sentiment permeated throughout the market and is driving a wave of sell-offs that are having a pronounced impact on tech-sector valuations. That seems to be what caught Intel today.