Tech sector selloff as chip stocks plunge amid AI spending concerns
Memory chip stocks led a broad tech retreat on Tuesday with Micron dropping over 10%, triggering concerns about AI profitability and spending. The S&P 500 fell 1.44% while the Nasdaq slid 2.21%, as semiconductor companies faced pressure over capital expenditure sustainability.
Semiconductor Rout Shakes Tech Index
The S&P 500 and the Nasdaq Composite were lower on Tuesday as a tech sell-off that began during the prior session picked up steam overnight, with the broad market index falling 1.44% to 7,365.46, while the tech-heavy Nasdaq slid 2.21% to close at 25,587.04, and the Dow Jones Industrial Average ending down 45.87 points.
Memory Chips Hit Hardest
Micron Technology dropped more than 10%, putting it on track for its worst day since June 5, leading a broad selloff in tech, with Marvell Technology also shedding 8%, while Sandisk lost 11%. South Korea and its 10% fall in the KOSPI led the downside action. Wall Street ended lower on semiconductor selloff as AI spending concerns mount.
Defensive Pivoting and Mixed Signals
The major averages came off their lows as tech stocks outside of chipmakers such as Microsoft and Amazon as well as defensive stocks like Walmart, Procter & Gamble and Johnson & Johnson rose, with International Business Machines shares popping 5% following an upgrade to overweight at JPMorgan. Wells Fargo downgraded Ross Stores to equal weight from overweight, noting that while CEO James Conroy has done a great job improving the marketing, merchandising and stores, the analyst expects the discount retail sector to slow drastically, with the low-end consumer continuing to worsen.
Earnings Catalysts Ahead
Micron's earnings on June 24 stands out as a key catalyst highlighting the importance of the memory complex in the broader AI narrative. Earnings are light from a calendar perspective but potentially heavy in terms of impact this week thanks to scheduled reports from FedEx late Tuesday and Micron late Wednesday.