"Investors are using chipmakers like ATMs": how US markets opened up

U.S. stock indexes fell at the opening of trading on Tuesday, May 19, amid an ongoing sell-off in shares of chipmakers, which have been the main beneficiaries of the bull market, Investors fear that the rally in these stocks has developed too fast and gone too far, CNBC explains.

- The S&P 500 fell 0.5 percent early in the session, which could lead the index to its longest streak of declines since March, CNBC calculated.

- The Nasdaq Composite U.S. technology index lost 0.6 percent.

- The Dow Jones blue-chip index also fell by about 0.6%.

Among the leaders of the fall were cloud infrastructure providers for AI - Nebius Group and CoreWeave. Their quotations fell by 3.4% and 4.2%, respectively, after Google agreed with Blackstone to create a competing project.

Shares of Nvidia, which is due to report its first-quarter results on Wednesday, were down 0.4%, they're on track for a third straight day of declines.

Oil prices continued to decline on Tuesday following US President Donald Trump's announcement: he said on Monday evening that he had decided not to strike Iran for the time being after requests from the leaders of three Middle Eastern countries. Brent crude futures fell about 1% on Tuesday, trading at $111 per barrel, while WTI contracts fell 0.1% to $108.5.

At the same time, the debt market is still under pressure: the yield on 10-year bonds exceeded 4.6%, while the yield on 30-year bonds is approaching 5.18%.

Market participants were locking in profits and building up cachet Tuesday, triggering a selloff in shares of semiconductor makers, Jeff Killburg, founder and head of KKM Financial, told CNBC. "Investors are using chipmaker securities as a short-term ATM and strategically locking in some profits after a historic parabolic rally in the sector," he said.

According to Seaport Research, the near-vertical rise in semiconductor company quotes in April and early Ma has caused their valuations to move too far away from fundamentals. "We believe the semiconductor market will be volatile in the near term," warned Seaport analyst Joe Goldberg. "AMD and Intel have a good chance of meeting current market valuations over time, but Nvidia remains hostage to overly high expectations and severe supply constraints," he said.

Kevin Gordon, head of macro research and strategy at the Schwab Center for Financial Research, believes the best days of this semiconductor rally are behind us. "In terms of positioning and how overheated the market has become, it's unlikely we'll see as sharp a rally as we did after the March lows," he told CNBC.

This article was AI-translated and verified by a human editor