The Nasdaq 100 has entered a correction phase. The "Wall Street fear" index jumped

The Nasdaq 100 Technology Index, which tracks the performance of the 100 largest companies traded on the Nasdaq, entered a correction zone during trading on July 28. Bloomberg noted that the index was approaching this level. Concerns about whether big tech companies’ investments in artificial intelligence will pay off are dampening investor sentiment toward the prospects of the tech giants, which have driven most of the stock market’s growth this year, the agency notes.

Against this backdrop, the Nasdaq 100 lost 1.8% on July 28, falling to 27,541.4 points—meaning that, relative to its peak of 30,762.20 points reached on June 3, it had fallen by just over 10%. Meanwhile, the broader Nasdaq Composite (which covers the entire Nasdaq market) lost just over 1% on Tuesday. The broad U.S. S&P 500 stock index fell 0.22%, while the Dow Jones Industrial Average, on the other hand, gained 0.67% on news of a de-escalation of the conflict in the Middle East and falling oil prices.

The Wall Street Fear Index (VIX) rose by nearly 3% to 19.19 amid a sell-off in tech stocks—any reading above 20 indicates heightened market volatility.

The Nasdaq 100 is falling amid an intensifying sell-off in semiconductor stocks, according to Bloomberg. On July 28, the Philadelphia Semiconductor Index, which tracks this sector, plummeted by more than 6%. Shares of Nvidia—the market leader in AI chips—fell by about 1%, while AMD shares lost nearly 10%. Shares of Broadcom (–2%), Intel (–8.5%), Marvell (–11%), and Qualcomm (–2%) are also trading in the red. Shares of leaders in the memory and data storage sector—Micron Technology, SK Hynix, and SanDisk—also fell by nearly 11%, 9%, and 15%, respectively. The sell-off also affected semiconductor equipment manufacturers: ASML shares lost 5%, Applied Materials shares fell nearly 9%, and Lam Research shares dropped more than 10%.

The sell-off of semiconductor stocks has been ongoing in the U.S. for some time now—on Tuesday, it followed a decline in semiconductor stocks in Asia. Signs of progress in China’s chip manufacturing industry have heightened concerns about the sustainability of investments in artificial intelligence, Bloomberg explains. Market participants are reacting to a report by The Information, which reported yesterday that a state-backed Chinese company has launched mass production of lithography equipment for chip manufacturing. This has raised concerns among investors that China is moving toward technological self-sufficiency in semiconductors faster than expected.

“People are concerned about [Big Tech’s] capital expenditures, the return on those investments, and the level of free cash flow [of major U.S. tech companies]—ahead of the Big Tech earnings reports expected this week, — there has been some position reduction,” explained Jim Awad, senior managing director at Clearstead Advisors (as quoted by Bloomberg). “If they [the big tech companies] manage to convince and reassure investors this week, it will provide significant support to the market,” he added, emphasizing, however, that if the cash flow of major tech companies declines further, while capital expenditures increase—‘I think we can expect this group [of major U.S. tech companies] to remain under pressure,’ Awad stated.

Last week, following the release of its quarterly report, Alphabet’s stock suffered its biggest one-day drop in more than a year—the company reported a negative cash flow for the first time in its history and also announced an increase in its annual capital expenditure plans.

On Wednesday, Meta Platforms and Microsoft will release their quarterly reports, and on Thursday, Amazon will report its results.

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