As controversy continues over overvalued artificial intelligence (AI) stocks, selling concentrated in semiconductor names sent all three major U.S. indexes lower.
According to the New York Stock Exchange on the 16th (local time), the Dow Jones Industrial Average finished down 105.67 points, or 0.20%, at 52,552.97. The Standard & Poor's (S&P) 500 fell 38.63 points, or 0.51%, to 7,533.77, and the tech-heavy Nasdaq composite ended down 387.28 points, or 1.47%, at 25,881.95.
Taiwan's TSMC posted an earnings surprise in the second quarter, far beating market expectations on the back of growing demand for AI Semiconductor chips, but investor sentiment instead focused on profit-taking across semiconductor shares. The Philadelphia Semiconductor Index, made up of 30 major U.S.-listed chip stocks, plunged 4.3%. Nvidia, the leading AI chip maker, fell 2.40%, and Alphabet, Google's parent, lost 4.4%.
Memory-related names also saw steep losses. Micron fell 5.65%, while SanDisk (-12.63%), Seagate Technology (-10.00%), and Western Digital (-9.15%) also dropped sharply. Major chipmakers including Intel (-5.84%), AMD (-5.33%), and Marvell Technology (-8.71%) weakened across the board. SK hynix American depositary receipts (ADR) listed on the Nasdaq plunged 13.69%.
Paul Nolte, chief market strategist at Murphy & Sylvest, said of the day's selling in chip stocks, "This is due to the excessively large weight of semiconductors in the S&P 500," noting, "Just three to four years ago the weight was around 8%, but it has now surpassed 20%. In contrast, other sectors are showing a relatively sound trend."
By contrast, earnings season has gotten off to a relatively smooth start. According to CNBC, as of the day, 87% of the 40 S&P 500 corporations that released results beat market expectations.