Global Tech Stocks, Chipmakers Sell Off, Weighing on US Indexes

The Nasdaq MarketSite in New York. Photo by Michael Nagle /Bloomberg

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(Bloomberg) — A global chips selloff is once again hitting the tech-heavy Nasdaq 100 as investors grow increasingly skeptical about lofty artificial-intelligence valuations.

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The Nasdaq 100 Index declined 1.6% at the open as semiconductor darlings Micron Technology Inc. and Sandisk Corporation among the largest decliners. 

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The S&P 500 fell 0.6% as declines in the tech sector outweighed gains in defensive areas like consumer staples and real estate. The blue-chip Dow Jones Industrial Average fell 0.4%.

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For the second time this week, concerns about AI valuations started in Asia and spread across markets. Two of China’s best-known hedge funds said AI stocks are in a bubble that may be ready to pop. OpenAI backer SoftBank Group Corp. tumbled in Japan after a New York Times report the ChatGPT owner may delay its initial public offering until 2027. South Korea’s highly concentrated Kospi Index was hit by a second trading halt this week as chipmakers plunged, before recovering some losses.

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In the US, the VIX Index, often called the fear gauge, climbed back above 20 points. Investors have pulled money from US equities for the first time in three months, shedding $8.5 billion, according to Bank of America data. 

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“There is a really big question as to whether or not this equity market will have the patience with these hyperscalers to wait for the returns to come,” Cameron Dawson, chief investment officer at Newedge Wealth, said in a Bloomberg TV interview.

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Technology stocks are finishing off a roller-coaster week on concerns that the rally in high-flying chipmakers may have run too far. A blowout outlook from Micron had boosted the mood Thursday, but were offset by Apple Inc.’s move to raise prices. 

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“We would not be buying big tech stocks or AI stocks at current levels, as their dominance is starting to erode, as the Mag 7 and bitcoin peaked 9 months ago and have not recovered. The market is telling us something and investors ought to listen,” said Richard Reyle, chief investment officer, Questar Capital Partners.

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ON Semiconductor shares are dropping sharply after an all-stock deal to buy Synaptics spurred a downgrade at TD Securities.

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Other notable single-stock moves include Nike Inc. shares are sliding after a downgrade from KeyBanc Capital Markets and a slate of price target cuts, including from at Deutsche Bank and Stifel.

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Crude oil continued to slide as tanker traffic continues to flow through the Strait of Hormuz despite a shocking attack on a ship.

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“With the peak in energy prices now behind us, headline inflation has the room it needs to fall. That is not to say price pressures have vanished entirely,” said Brian Jacobsen, chief economic strategist at Annex Wealth Management. 

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Still ahead Friday, traders will parse University of Michigan sentiment data and inflation expectations at 10 a.m. in New York. Earlier, Commerce Department data showed the US merchandise-trade deficit widened in May to the biggest in more than a year as exports fell and imports rose.

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Sectors in Focus

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—With assistance from Sagarika Jaisinghani and Jackie Edwards.

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