Nasdaq Drops 1.2% as AI Chip Selloff Deepens
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- Nasdaq Composite dropped 290.20 points, or 1.16%, to 24,641.89 on Tuesday, leading declines as chip stocks sold off and investors grew uneasy about AI-related corporate spending.
- Chip stocks tumbled across the board: Micron slid 6.4%, Intel lost 5%, SK Hynix fell 6%, TSMC dropped 2.7%, and Nvidia shed 1.2%.
- The Philadelphia SE Semiconductor Index fell 4% and is now more than 20% below its June all-time high, while the Roundhill Memory ETF dropped 10% to a two-month low and has traded below its 50-day moving average for two weeks.
- Hyperscalers Amazon, Meta, Apple, and Microsoft report earnings later this week, with investors questioning whether their several-hundred-billion-dollar AI investments are yielding returns; Dakota Wealth's Robert Pavlik called the spending levels 'irresponsible.'
- China is showcasing cheaper AI models and deepening its presence in the semiconductor industry, adding competitive pressure to U.S. chip names.
- Oil prices fell 2.4% to a one-week low as a fragile U.S.-Iran ceasefire appeared to hold despite drone-attack reports in Saudi Arabia, Jordan, and Iraq; Trump said 'good talks' with Iran were underway.
- The Federal Reserve is set to announce its interest-rate decision Wednesday, with traders pricing a 37% chance of a rate hike this week, per LSEG data.
Why it matters: The semiconductor index has now lost over 20% from its June peak, and with Amazon, Meta, Apple, and Microsoft reporting earnings this week on collective AI capex running into the hundreds of billions, the tape is forcing a verdict on whether the AI spending cycle has a ceiling. Add a 37%-priced Fed rate hike and rising Chinese competition, and the chip leaders are getting hit from three directions at once.
