Markets
Chip stocks drop 5.6% and the Nasdaq falls 2% as Meta and Tesla results revive doubts over AI spending
The Philadelphia semiconductor index hit its lowest level since July 29 by midday on Thursday, while consumer staples, defence and Blackstone rallied.
HedgeWeekly News Desk ·
US technology shares sold off on Thursday as investors looked past strong third-quarter profits to the cost of building AI infrastructure. At 11:58 a.m. ET the Nasdaq Composite was down 2.06% at 26,152.90 and the S&P 500 had lost 1.10% to 7,671.90, Reuters reported, while the Dow Jones Industrial Average was nearly flat at 52,826.91. The Philadelphia SE Semiconductor Index fell 5.6% to its lowest level since July 29 and was on course to lose more than $616 billion in market value. The Nasdaq-100 was set to give up close to $1 trillion.
Meta led the retreat after pairing better-than-expected revenue with a plan for a new class of non-voting shares to help fund its AI build-out, falling between 5% and 7% during the morning. Intel and AMD each dropped more than 6% in early trade, according to Invezz, and Lam Research fell as much as 10% after its finance chief said guidance would have been higher without near-term supply chain constraints. Nvidia and Amazon were each down more than 3% by midday, and Tesla slipped after cutting its capital spending forecast.
The money rotated rather than left. Consumer staples climbed 2.5%, with Procter & Gamble up 6.1% after its results, while Lockheed Martin gained 5.9% and Blackstone close to 6%. The S&P 500 growth index fell 2.2% as the value index held flat. Brent crude traded near a five-month high around $111 to $112 a barrel after further Houthi attacks on Saudi Arabia, and demand for safety pulled the 10-year Treasury yield to about 5.00%. The Cboe Volatility Index rose, ending three sessions of declines.
Why it matters: the selloff is about valuation and capital intensity, not missed profits. LSEG data show analysts now expect S&P 500 third-quarter earnings growth of 32.3%, up from 30.7%, yet the session erased Wednesday's AI rally that followed results from SpaceX and Super Micro. For funds, the dispersion is the signal: semiconductors down 5.6% and growth down 2.2% against a flat value index and a near-flat Dow points to rotation within US equities, which hits concentrated AI exposure hardest. An unexpected drop in weekly jobless claims also supports expectations that the Federal Reserve will hold rates at next week's meeting, leaving little macro relief for richly valued tech.