Chip stocks drop 12% in three days as Nasdaq 100 hits correction
A three-day chip selloff driven by doubts about AI spending pushed the Nasdaq 100 10% below its peak and dragged down South Korea's market Tuesday. The Dow rose Monday as investors shifted out of tech.
AI-assisted · US Brief desk · Sources listed below
What happened
A gauge of U.S. chipmakers has fallen 12% over three trading sessions, and the Nasdaq 100 is now 10% below its peak, the usual definition of a correction, according to Bloomberg data cited by CNBC-TV18. The PHLX semiconductor index fell 3.4% on Monday after a 7.2% plunge on Friday, Yonhap reported.
Timeline: On Friday, Intel shares fell 29% after it forecast quarterly revenue below estimates and said it did not expect positive cash flow this year, Reuters reported. On Monday, the Dow rose 213.67 points, or 0.4%, to 51,983.98, while the Nasdaq fell 1.1% and the S&P 500 0.5%. Marvell Technology fell 13% after announcing a $115 billion all-stock deal, including debt, for optical-parts maker Lumentum, whose shares fell 19%. Intel fell almost 9% more, and AMD fell 7.5% ahead of its results on Tuesday. On Tuesday, South Korea's Kospi closed down 3.59% at 5,648.79, with Samsung Electronics down 4.15% and SK hynix down 5.03%, Yonhap reported.
The bear case: Investors want proof that AI spending will earn a return. "Companies have to realize there's a limit to how much they spend," Jake Dollarhide, chief executive of Longbow Asset Management, told Reuters. "Concerns about profitability of AI investments persist," said Kim Seok-hwan of Mirae Asset Securities, according to Yonhap.
Why it matters
Chipmakers have led the market higher on the bet that AI spending would keep growing. The selloff reflects growing doubt about whether that spending will pay off soon, and it is spreading to markets that depend on chips, like South Korea's.
More context
The bull case: The broader market is holding up better than tech. The Dow gained Monday, and Dollarhide called the day's gains a "buy the dip" reaction after a bruising October in which the Nasdaq fell 5.3%. History also leans positive after midterms: a Ned Davis Research study found the S&P 500 has gained an average of 14% in the year after midterms since 1930, though only 8.8% when the president's party lost the House, CNBC-TV18 reported.
What is still unknown: how today's election results land with investors, and whether chip earnings this week, starting with AMD, calm or deepen the worry. "It is likely to remain volatile through the earnings season," said Kiran Ganesh of UBS Global Wealth Management, according to Reuters. Job openings data comes Tuesday, jobless claims Thursday, and Friday's payrolls report, where economists cited by Bloomberg expect 65,000 jobs added in October with unemployment steady at 4.2%.
Bottom line: The AI trade that carried stocks this year is being tested, and this week's earnings, election and jobs data all arrive at once.
3 listed sources
References listed by US Brief; a source count is not a verification score.
Editorial sourcing notes
Sourcing: Reuters reporting via the New York Post for Monday's U.S. closes, stock moves and investor quotes; Yonhap for the PHLX chip index moves and Tuesday's Seoul close; CNBC-TV18, citing Bloomberg data, for the three-day 12% slide, the Nasdaq 100 correction, the Ned Davis Research study and this week's data calendar. A correction is a 10% drop from a recent peak. Payroll figures are economists' forecasts, not results. Photos are file images.
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