Wall Street started Tuesday on the back foot as a fast-moving tech sell-off widened beyond the U.S. and into Asian and European markets. The pressure was heaviest in memory chips and other semiconductor names, with the S&P 500 down 0.8% and the Nasdaq Composite off 1.2%.
The move marked a sharper pullback for growth stocks after Monday’s weakness, when the Nasdaq fell 1.3% and Alphabet led the decline. Defensive names held up better, while investors rotated toward areas that looked less exposed to the sudden drop in high-momentum tech shares.
Big Tech Stays Uneven
Not every large-cap technology name was hit the same way. Microsoft and Amazon moved higher, while Alphabet continued to slide, falling almost 2% after a 5% drop in the prior session tied to concern over high-profile AI talent departures at the company.
The Dow Jones Industrial Average traded around the flatline, helped by gains in several defensive and non-chip names. Walmart, Procter & Gamble, Johnson & Johnson, Merck and Sherwin-Williams all moved higher, while International Business Machines jumped 4% after JPMorgan upgraded the stock to overweight.
Semiconductor Pressure Spreads Globally
The sell-off was not limited to U.S. markets. South Korea’s Kospi led losses in Asia, with memory chip leader SK Hynix closing down more than 12% after the country’s benchmark fell almost 10% from its recent level, even though it is still up 95% for the year.
Japan’s Nikkei 225 also dropped 3.55%, ending an eight-session winning streak. U.S.-traded Micron Technology fell 11%, while Sandisk lost 12%, Seagate Technology slipped more than 8%, Intel fell 4%, Advanced Micro Devices dropped 5% and Qualcomm lost 8%.
Europe Joins the Move Lower
European markets also turned sharply lower. The pan-European Stoxx 600 fell 1%, with the Stoxx 600 Technology index down 3% as ASMI and STMicroelectronics both dropped more than 6%.
Andrew Slimmon, a senior portfolio manager at Morgan Stanley Investment Management, told CNBC’s “Squawk Box” on Monday that the AI winners have become crowded. “The AI beneficiaries are the sell-off, and I don’t think they’re expensive, but they’re crowded,” he said.
What Comes Next for the Chip Trade
The latest pullback comes as investors continue to reassess the pace of the AI trade and the valuations attached to the biggest beneficiaries. State Street’s Technology Select Sector SPDR ETF (XLK) fell 3%, while the VanEck Semiconductor ETF (SMH) dropped 6% as the pressure built across the group.
SpaceX ticked up, but the broader message in markets was clear: after a long run for AI-linked stocks, traders are becoming more selective. Cerebras is set to report earnings after the bell Tuesday, and Micron will report results on Wednesday after the close.
