U.S. chip and AI-linked stocks slide as valuation fears rattle Wall Street

Traders Union
All News
Financial News
U.S. chip and AI stocks slide

Highlights

Nasdaq Composite falls 1.5% Thursday as major chip and AI-linked stocks like Sandisk, Western Digital, and Seagate drop over 9%, intensifying technology sector losses.
TSMC posts 77% quarterly profit growth and announces an additional $100 billion U.S. expansion, yet its U.S.-listed shares close down 2.3% amid broad de-risking and deleveraging concerns.
Brent crude rises to $84.23, up 15% since July after U.S.-Iran tensions disrupt the Strait of Hormuz, fueling fears of renewed U.S. inflation and market volatility.

Technology sell-off deepens across chips and AI trades

As first reported by Financial Times, U.S. tech stocks fall sharply on Thursday, with the Nasdaq Composite down 1.5% as losses spread across semiconductors, memory companies and other high-growth names tied to the AI boom.

Memory and storage groups Sandisk, Western Digital and Seagate each drop more than 9%, while Intel and Micron slide about 6%. Taiwan Semiconductor Manufacturing Company reports a 77% jump in quarterly profit and says it will invest a further $100 billion to expand production in the U.S., yet its U.S.-listed shares still end the session down 2.3%.

The retreat adds to signs that investors are questioning elevated valuations in companies at the center of the AI trade and are unwinding debt-fueled positions. JPMorgan strategist Nikolaos Panigirtzoglou says the deleveraging phase that began in June appears to remain under way, with further room for reductions in leveraged equity ETFs, options and margin accounts, creating a headwind for equities.

Investors are also becoming more cautious about when heavy data center spending by U.S. technology groups will translate into returns, while cheaper Chinese alternatives to companies such as Anthropic and OpenAI add to the pressure. IBM falls more than 20% on Tuesday after warning on profit as customers shift spending from its systems toward AI infrastructure build-outs, and Vital Knowledge analysts say strong results are no longer lifting technology stocks while disappointments are being punished severely.

SpaceX, which has symbolized investor enthusiasm for AI-linked companies since its record $86 billion initial public offering last month, continues to pull back on Thursday. Its shares fall 3.1% to $131.11 after listing at $135 and rising as high as $225.64 amid strong retail buying and optimistic revenue expectations from underwriters.

Oil, inflation and rates add market pressure

A broader risk-off mood is also weighing on markets as macroeconomic concerns build alongside the technology sell-off. A Goldman Sachs basket of momentum stocks, made up of shares that have led the U.S. market, falls 6% on Thursday and has lost a fifth of its value since the start of this month.

Large technology groups that are spending heavily on data centers also retreat, with Google down 4.4% and Amazon off 1.2%. Debt issued by hyperscalers has also come under pressure in recent weeks as investors question the scale of their borrowing and spending plans.

At the same time, traders are monitoring a renewed flare-up in hostilities between the U.S. and Iran after Washington launches a sixth straight day of strikes on Thursday afternoon. The tensions disrupt traffic through the Strait of Hormuz, a key route for global oil shipments, helping lift Brent crude to $84.23, up 15% since the start of July.

Higher oil prices risk reigniting U.S. inflation after lower energy costs last month helped ease consumer price growth. Federal Reserve chief Kevin Warsh says this week that the central bank has no tolerance for persistently high inflation, while Goldman Sachs strategist Vickie Chang says oil and the Fed may yet resolve in a modestly benign direction, though she warns that a sustained further rise in oil prices remains the main macro risk.

Our earlier article on TSMC’s $100 billion Arizona expansion explained how the company is scaling U.S. manufacturing to meet sustained AI-chip demand while lifting its total U.S. commitment to $265 billion. We also noted the 77% jump in quarterly profit and higher capex guidance, alongside management’s warning that global expansion could pressure margins even as AI-related orders remain strong.

This material may contain third-party opinions, none of the data and information on this webpage constitutes investment advice according to our Disclaimer. While we adhere to strict Editorial Integrity, this post may contain references to products from our partners.