Nasdaq Plunged More Than 1%: The AI Sell-Off Continues

The Nasdaq Composite Index plummeted by more than 1% during trading on July 7: Investors are questioning the stock market rally driven by AI developments and are also assessing reports that DeepSeek, a Chinese competitor to Anthropic and OpenAI, is developing its own AI chip, Reuters reports.

Against this backdrop, the Nasdaq Composite lost 1.3% on Tuesday, the broad U.S. stock index S&P 500 fell 0.5%, while the blue-chip index showed gains in the first minutes after the market opened, heading toward new record highs, but at the time of publication had also slipped slightly into negative territory—losing a symbolic 0.04%.

CNBC notes that chipmakers’ stocks are once again among the biggest losers. The Philadelphia Semiconductor Index, which tracks semiconductor stocks, fell 7% on July 7. Shares of Micron—one of the three largest manufacturers of computer memory—plummeted by the same amount; shares of KLA (down more than 8%), Marvell Technology (down 9%), Broadcom (down 2.5%), and AMD (down 8%).

SpaceX shares also fell 5.5% amid a broad sell-off in the tech sector— the company was added to the Nasdaq-100 index on Tuesday. The decline occurred despite numerous optimistic forecasts and ratings the company received on Tuesday from Wall Street analysts (among others, the lead underwriters of SpaceX’s IPO—Morgan Stanley and Goldman Sachs—began covering the stock).

Investors are shifting their focus to companies in other market sectors and buying, among other things, shares of big tech companies that have recently declined, as well as stocks in the healthcare and financial sectors, CNBC notes. Against this backdrop, shares of Eli Lilly, one of the world’s largest pharmaceutical companies, jumped more than 3% on July 7; Microsoft rose 1.5%; Walmart by 1.4% (after the company announced price cuts on items such as ground beef), and Coca-Cola by 2.5%.

Pressure on the AI market began on Tuesday in the Asia-Pacific region. South Korea’s Kospi index fell nearly 5%—following a nearly 7% drop in shares of memory chip maker Samsung Electronics. The company reported significant profit growth in the second quarter, but investor concerns about future AI spending by major Western companies, as well as demand for Samsung’s products, overshadowed that growth, according to CNBC.

— “The market’s reaction to Samsung’s [results] reflects one of the main risks in the coming weeks: companies’ second-quarter results are likely to be quite strong in absolute terms. However, unlike the first-quarter earnings season, investor expectations are now very optimistic (and the S&P 500 is roughly 1,000 points higher than it was before the release of the previous quarterly results). “This means the bar for expectations has been raised significantly,” CNBC quotes Vital Knowledge founder Adam Krisfulli as saying.

— Other analysts share a similar view. “Samsung’s results were good in and of themselves from a fundamental standpoint. However, this [sell-off in tech stocks] then appears to have triggered a chain reaction in the market: as soon as investors begin to view Samsung negatively, these concerns spread to the market as a whole,” Reuters quotes Michael Field, chief equity strategist at Morningstar.

— “Since the semiconductor sector has already grown significantly, any signs of a weakening in the positive outlook trigger aggressive sell-offs. Samsung’s earnings report was strong, but investors’ previous optimism has faded,” Bloomberg quotes Michael Pervs, CEO of Tallbacken Capital Advisors, as saying. However, the expert believes the prolonged rally in chipmakers’ stocks may not be over yet.

Despite the recent pullback, the Philadelphia Semiconductor Index is up 68% year-to-date.

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