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Nasdaq 100 nears correction as semiconductors slide on AI spending doubts
The Nasdaq 100 is 9.5% below its June 2 record, while the SOX has fallen 25% since its June 22 high after a 4.5% drop Tuesday.
The Nasdaq 100 inched closer to a correction on Tuesday as a worsening selloff in semiconductor stocks fed broader skepticism about how much money Big Tech is spending on artificial intelligence, according to LiveMint Markets citing Bloomberg.
Janney Montgomery Scott’s Mark Luschini said the AI trade has turned into a one-way selloff as sentiment shifts, with investors questioning eventual payoffs from rising AI investment. The tech-heavy Nasdaq 100 fell 1% and is down 9.5% from its June 2 record, just shy of the 10% technical level used to define a correction.
Semiconductors have been hit harder, with the Philadelphia Stock Exchange Semiconductor Index, or SOX, dropping 4.5% Tuesday and sliding 25% since a June 22 peak, putting it beyond the technical threshold for a bear market. Luschini warned of a negative feedback loop, where higher AI spending has reduced free cash flow for some companies and could lead investors to sell stocks that have benefited most from the boom.
The report also points to concerns that progress in China’s advanced chipmaking is compounding worries about the sustainability of AI spending. It notes that Alphabet’s largest one-day drop in more than a year followed negative free cash flow tied to heavy AI capital expenditures, and it says major AI spenders including Microsoft, Meta Platforms, and Amazon are scheduled to report earnings this week.
Latest closeNasdaq Comp. 24,876.91 ▼0.2%