Nasdaq falls as chip selloff deepens AI rally concerns

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Nasdaq falls on chip selloff

Highlights

Micron drops 4.7% and Sandisk falls 7.3%, causing the PHLX chip index to sink 4.65% and reduce its 2026 gain to approximately 74%.
Eight of 11 S&P 500 sector indexes end lower as the S&P 500 slips 0.45% to 7,503.85, Nasdaq drops 1.16% to 25,818.69, and Dow Jones falls 0.25% to 52,925.15.
SK Hynix will test market appetite on Friday with its U.S. Nasdaq debut, following Samsung's underwhelming results and DeepSeek's move toward developing its own AI chip.

Chip stocks lead market decline

As reported by Reuters, chipmakers in Asia and the U.S. fall after Samsung Electronics posts blowout earnings that still fail to meet investors' elevated expectations. Micron drops 4.7% and Sandisk loses 7.3%, helping push the PHLX chip index down 4.65% and trimming its 2026 gain to about 74%.

Pressure on the sector also builds after Reuters reports that Chinese startup DeepSeek is developing its own AI chip, a move that could reduce its reliance on Nvidia and Huawei products. Investors are increasingly concerned that the rapid run-up tied to AI data center spending has left memory chipmakers and other related stocks too expensive.

"The story of today is the story of the last few weeks, and that's rotation after the blistering run in the AI buildout, semis and memory. Expectations have gotten to be almost impossible to beat for these companies," Zachary Hill, head of portfolio management at Horizon Investments in Charlotte, North Carolina, says.

Another test for appetite in the sector arrives on Friday, when South Korean chipmaker SK Hynix begins trading its U.S. listing on the Nasdaq.

Broader indexes weaken as investors watch Fed

Losses in semiconductors weigh on the wider market, with eight of the 11 S&P 500 sector indexes ending lower. Industrials lead the declines with a 3.41% drop, followed by materials, which fall 2.45%.

The S&P 500 declines 0.45% to 7,503.85, while the Nasdaq falls 1.16% to 25,818.69 and the Dow Jones Industrial Average slips 0.25% to 52,925.15 after briefly touching a record high earlier in the session. Even so, advancing stocks in the S&P 500 outnumber decliners by a 1.3-to-one ratio.

Elsewhere, Elon Musk's SpaceX falls almost 7% in its first day of trading as part of the Nasdaq 100 index and after several brokerages initiate coverage on the stock. Fiserv rises 1.8% following media reports that it holds talks with U.S. banks including JPMorgan and Bank of America about selling its debit card payments infrastructure business.

Oil prices rise after reports of attacks on vessels near the Strait of Hormuz, while investors also await minutes from the Federal Reserve's latest meeting on Wednesday, the first under Chair Kevin Warsh. Trading volume on U.S. exchanges remains relatively light at 17.5 billion shares, below the average 23.3 billion over the previous 20 sessions.

Our earlier article on the tech-led earnings outlook for U.S. equities explained how elevated profit expectations—especially in semiconductors—were shaping broader market sentiment. It also singled out Micron as a key AI-linked memory play and noted that positioning around South Korea, including SK Hynix’s planned U.S. listing, could become an added catalyst for near-term sector rotation.

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