NEW YORK: The Nasdaq and the S&P 500 fell to over one-week lows on Tuesday, dragged down by sharp losses in semiconductor stocks as investors braced for a more hawkish Federal Reserve and scrutinized growing debt-funded AI spending.
If losses hold, the Nasdaq 100 would lose over USD1 trillion in market value. Nvidia fell 3.7 percent, Alphabet lost 1 percent, while chipmakers Intel, Marvell Technology and Advanced Micro Devices fell between 3.8 percent and 9 percent.
Memory chipmakers Micron Technology and SanDisk , among the best performers on the S&P 500 this year, fell 11 percent and 12.6 percent, respectively.
A sharp selloff in the previous session rocked US tech heavyweights, driven by doubts over hyperscalers’ debt-backed AI spending despite stretched valuations.
“The trade has been highly concentrated and flow-driven, which makes it vulnerable to relatively small shifts in sentiment,” said Ross Mayfield, investment strategy analyst at Baird.
“It does not appear to be closely tied to the fundamentals of the AI story, but rather to the heavy concentration and strong inflows into tech and global tech over the past few months (that are) now starting to unwind.”
Micron’s results, expected on Wednesday, could offer clues on the outlook for the memory and AI chip sector after a searing rally this year.
The Philadelphia SE Semiconductor index tumbled 7.6 percent, while the S&P 500 tech sector index shed 3.2 percent.
At 11:15 a.m. ET, the Dow Jones Industrial Average rose 14.39 points, or 0.03 percent, to 51,727.10, the S&P 500 lost 83.46 points, or 1.12 percent, to 7,389.33 and the Nasdaq Composite lost 444.00 points, or 1.70 percent, to 25,722.61.
The rate-sensitive Russell 2000 index was down 0.8 percent. The CBOE Volatility Index, Wall Street’s fear gauge, hit an over one-week high, climbing 2.3 points to 19.58.
“When you have this potentially higher rate environment and this competition for money (due to big IPOs) and kind of other uncertainties about oil prices …the whole market is likely to get more volatile,” said Melissa Brown, managing director of investment decision research at SimCorp.
The S&P 500 is, however, heading for its strongest quarterly gain in six years, buoyed by a Middle East ceasefire and stronger-than-expected earnings, even as concerns over stretched AI stock valuations resurface.
Six of 11 major S&P 500 sectors moved higher, with consumer staples rising the most at 1.9 percent. With highly priced tech shares coming under pressure recently, investors have shifted focus to other areas of the market.
Shares of Elon Musk’s SpaceX were last up 2.1 percent, reversing early losses. More than USD600 billion was wiped off the company’s market value over the past three sessions.
Comments