US chipmakers plunged on Friday, erasing approximately $1.3 trillion in market value, with major AI-related stocks like NVIDIA (NVDA), Micron Technology, and AMD experiencing steep declines. The selloff continued the fallout from Broadcom's (AVGO) weak quarterly results earlier in the week.
The Philadelphia Semiconductor Index (SOX) tumbled 10.3%, marking its largest single-day percentage drop since the global market turmoil triggered by the COVID-19 pandemic in March 2020.
The Friday selloff extended losses from Thursday, which were sparked after Broadcom reported quarterly earnings showing that demand for its custom AI chips fell short of expectations.
The SOX index has fallen 12% over the two trading sessions, signaling growing investor apprehension towards high-priced, high-flying tech stocks. This comes as Elon Musk prepares for a massive initial public offering (IPO) for SpaceX next week, with a potential valuation as high as $1.75 trillion.
The chip index had reached a record high as recently as Wednesday. Even after Friday's sharp decline, it remains up 73% year-to-date.
NVIDIA, the world's most valuable chipmaker, fell roughly 6%, shedding over $300 billion in market capitalization.
Micron Technology plummeted 13%, losing about $150 billion in value. Recent investor darling Marvell Technology retreated 17%, while AMD dropped nearly 11%.
Dennis Dick, a proprietary trader at Triple D Trading, commented, "You had a lot of people who were just buying the dip blindly. Buying the dip blindly has been working for you, but today it didn't."
Concerns over rising interest rates, following stronger-than-expected jobs data, also rattled investors across the broader US market, with the S&P 500 index falling 2.6%.
Broadcom, one of the major beneficiaries of the AI race, declined 7.9%, bringing its two-day loss to nearly 20%.
A chief equity strategist at Wells Fargo stated, "The semiconductor sector was extremely overbought. That's why we're seeing the selloff. I don't think this signals the end of the semiconductor bull market."