The Nasdaq experienced a significant drop, primarily due to sharp declines in semiconductor stocks like Micron Technology and Sandisk, amid rising skepticism about the durability of Wall Street’s AI-inspired rally. Despite a strong earnings report from Samsung Electronics, investors appeared unsettled as high expectations around AI-related chipmakers gave way to profit-taking and uncertainty.
Memory and AI chip producers suffered losses worldwide, with Micron falling nearly 5% and Sandisk dropping over 7%. This pressured the PHLX semiconductor index, which fell more than 4.5%, trimming its impressive 2026 gain. The selloff reflected mounting apprehension about whether recent price surges tied to AI data center investments were justified or if market valuations had become excessively stretched.
Adding to investor concerns, news surfaced about the Chinese startup DeepSeek developing its own AI chip. This development hints at a potential reduction in reliance on established suppliers such as Nvidia and Huawei, intensifying competition within the sector.
The market’s nervousness over chip stocks aligns with a pattern of rotation following an intense rally fueled by AI enthusiasm. Industry analysts suggest that companies face challenging expectations that may be difficult to surpass in upcoming quarters, prompting traders to reassess risk.
Looking ahead, semiconductor investors will closely watch the upcoming listing of South Korean firm SK Hynix on the Nasdaq, which could influence sector sentiment further.
Meanwhile, broader market trends showed mixed results. The S&P 500 declined modestly, with industrials leading sector losses, and the Dow briefly touched a record before retreating. Positive momentum emerged in specific areas, including Fiserv, which gained after reports suggested potential asset sales in its payments infrastructure division.
Energy markets also reacted to geopolitical tensions, with oil prices climbing following reported attacks on vessels near the Strait of Hormuz, adding another layer of complexity to market dynamics.