Shares of Nvidia and other big chip companies pulled back, the day after a historic rally for the sector as investors got back to playing offense.

After a historic day of gains for the chip sector, many big semiconductor stocks are pulling back sharply on Thursday, as President Donald Trump's pause of tariff hikes on most countries wasn't enough to remove the cloud of uncertainty hanging over the technology sector.

"Tariff fears may have receded, but this is not over," Morgan Stanley's Joseph Moore said in a note to clients Thursday.

Cantor Fitzgerald's C.J. Muse asked: "Now what?"

But there's reason to believe that despite that uncertainty, the worst-case scenario for some of the sector's heavyweights isn't that bad.

Muse said that investors are back to playing offense in the chip sector, meaning they're showing a preference for artificial-intelligence beneficiaries such as NVIDIA, Broadcom and Taiwan Semiconductor Manufacturing.

"We view the AI bucket as still the best place to be long," Muse wrote, highlighting that companies here could deliver upside to Wall Street expectations for this calendar year. While Nvidia, Broadcom and TSMC are his three favorite plays there, he said Micron Technology looks compelling as well, as AI seems the "least economically sensitive" pocket of the chip sector.

All those names are taking tumbles Thursday though, with Nvidia's stock down 6%, Broadcom's down 7%, TSMC's down 5% and Micron's down 10%.

But those declines come a day after the chip sector had its best day ever, with the PHLX Semiconductor Index SOX rocketing 18.7% after the tariff "pause" announcement. Shares of Nvidia, Broadcom and Micron all soared more than 18% on Wednesday, while Taiwan Semi's stock leapt 12.3%.

Despite all the tariff-related fears, Morgan Stanley's Moore highlighted that he thought Nvidia would see "fairly minimal" microeconomic impacts from tariffs.

Nvidia has been preparing for GB200 server production in Mexico, he noted, which could help to mitigate stiff Asia tariffs.

"In general, shifting to North America should not be that difficult," Moore wrote. GB200, part of the Blackwell lineup, "is more complicated than the average contract manufacturing project, but the volumes just aren't that high."

Additionally, rack-scale products such as GB200 don't seem to be "a price sensitive market in the short run," he noted.

Moore said the economic outlook is another fear for investors these days. While he doesn't think Nvidia is recession-resistant, he said the company is in a decent spot.

"The type of recession also matters, as demand for GPUs remains resilient - and we would say risks to that come more from the financing side than from anywhere else," he wrote. "Modest drift lower in [the purchasing managers index], or slower consumer retail from tariffs, is not a problem for GPU spending, but financial strains in venture funding would be a problem."

At the same time, he said he's "surprised at the very negative views onNvidia's prospects" since hyperscale players have talked up capital-expenditure increases in recent months.