Deep losses in the global tech market on Monday and Tuesday have set off concerns that
the seemingly endless tech boom may be settling down. U.S. chip stocks fell from record
highs in a reversal for buyers of shares linked to the AI infrastructure buildout that has
powered the market over the last year. However, analysts are not so quick to warn of a
slowdown, especially in lieu of Micron’s upcoming earnings report.
The tech sector saw a rare losing session on Monday, as the Nasdaq, home to Nvidia,
Alphabet, Apple and Microsoft, lost more than 2%, triggering a selloff in the overseas
markets. South Korea’s Kopsi index closed 10% lower, drawn down by chipmaker SK Hynix
and tech giant Samsung, with both companies ending the session with losses of more than
12%.
In Europe, the Stoxx 600 Technology index led regional losses, declining 3%. Chipmaker
STMicroelectronics and Dutch semiconductor giant ASMI, were both down about 7%, each
among the biggest downward movers on the Stoxx 600.
On Wall Street, iShares Semiconductor ETF was down 6.2%, while Intel was 7.6% lower,
Micron lost 8.5% and AMD was down 6.2%. Chipmakers Nvidia were 3% lower, while
Qualcomm was down 8% and Marvel 9.4%.
“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 doesn’t appear to be closely tied to the fundamentals of the AI story, but rather to the
heavy concentration and strong inflows into global tech over the past few months now
starting to unwind,” said Mayfield.
SpaceX shares also extended their selloff, moving 3% lower after falling 16% on Monday’s
session. SpaceX’s record-breaking IPO fueled a trading frenzy in its first week as a public
company, but shares have unraveled in the past few sessions, erasing more than $600
billion in market capitalization since June 17. The companies’ shares are still more than
10% above their IPO price of $135.
The pullback in the wider tech sector dragged both the S&P 500 and the Nasdaq lower on
Monday, with investors rotating out of the so-called “Magnificent Seven” stocks. Amazon
and Meta continued their decline on Tuesday, shedding 0.7% each.
Despite the losses and the subsequent pressure exuded on global markets on Tuesday,
analysts do not fear a forthcoming tech market correction. “I don’t think we’re anywhere
near some type of catastrophic failure in the markets,” said Tom Hulick, CEO of Strategy
Asset Managers. “There’s too much liquidity out there, and the earnings momentum is very
strong right now,”
“AI is going to continue to grow earnings for companies in years to come. When you have a
capital expenditure in the trillions of dollars, it can throw valuations a little stratospheric for
companies like SpaceX or even Anthropic, but who’s to say what’s going to change the
world with some of these companies, and (what) they can do going forward,” said Hulick.
Wedbush’s Dan Ives noted that this sell off presents an opportunity for investors. “Clearly
this (downturn) will cause selling pressure and white knuckles for tech stocks in the U.S.
this morning as investors worry the overheated KOSPI sell-off has a spillover impact to U.S.
tech stocks,” he said, noting that nervousness was being amplified by Micron’s looming
earnings report due after Wednesday’s close.
“Taking a step back we continue to believe that in this market we will continue to go
through a number of ‘gut check moments’ in the tech trade as the AI Revolution remains in
the 3rd inning.”
Rate sensitive technology stocks have also been hurt by expectations of tighter monetary
policy under new Fed Chairman Kevin Warsh, especially as recent economic data points to
a resilient economy, even with high living costs and increasing inflation.
Late Wednesday, Micron released their much-anticipated earnings report for Q3 2026. The
memory chipmaker revealed their revenue more than quadrupled in the fiscal third quarter,
as the stock rose 16% in extended trading.
Thanks to the soaring demand tied to the AI boom, Microns revenue increased from $9.3
billion a year earlier. For the current quarter, the company expects revenue of about $50
billion, up from $11.3 billion a year earlier. That exceeds what analysts were expecting.
Micron said it has signed 16 long-term agreements with customers such as data center
operators and automakers that lock in sales for a period of three to five years.
Despite that, the tech-heavy Nasdaq fell early on Thursday, as Apple, Alphabet and Meta
Platforms had early declines. The Dow, meanwhile, notched an all-new intraday high on
Thursday.
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