Chip Stocks Fall to Bear-Market Brink in AI Unwind: Markets Wrap
(Bloomberg) — A selloff in chipmakers gathered pace, sending the group that has led this year’s stock rally to the edge of a bear market on worries that the artificial-intelligence spending spree is becoming harder to justify.
This week’s semiconductor tumble is set to be the worst since April 2025, with a key industry gauge sinking nearly 20% from a record. A breakthrough from Chinese AI startup Moonshot dented enthusiasm for the sector, which also joined broader equity losses amid geopolitical tensions. The Nasdaq 100 lost 1.3%. Oil jumped as the US and Iran traded attacks again on Friday.
Insatiable demand for all things related to AI had recently sent chip stocks to their best-ever quarter. But volatility resurfaced in July, with the group being pummeled by concerns over increased competition, possible overcapacity and whether massive investments in the technology will pay off.
While earnings and demand trends remain strong, the recent profit-taking suggests some investors are questioning how long the current pace of growth can continue, according to David Morrison at Trade Nation.
“The question now is whether this will become yet another ‘buy the dip’ opportunity, or if the pace of selling accelerates as everyone rushes to the exit doors at the same time,” he added.
AI-related stocks have become more volatile as investors question both the pace and payoff of investments, but corporate earnings have not yet shown any slowdown in demand, according to Angelo Kourkafas at Edward Jones.
“The AI theme is likely maturing rather than breaking, which is a healthy part of how transformative investment cycles evolve,” he said. “Investors should maintain exposure to the AI theme, but complement it with more diversified and differentiated sources of return, including cyclical sectors, value-style investments, and international stocks.”
Sharp stock rotations are necessary for the equity rally to broaden beyond the tech sector, according to Citigroup Inc.’s Beata Manthey. She said the current market weakness reflects a shift between sectors rather than a market breakdown.
“The market has started to hope for some long-awaited broadening,” Manthey told Bloomberg Television. “For that to happen, you need to have some rotations, and rotations tend to happen in quite a violent way sometimes.”
Corporate Highlights:
Meta Platforms Inc. is in early discussions to lease computing power from its data centers to Anthropic PBC, according to people familiar with the matter, an opportunity for the social media giant to build a new business around its heavy investment in AI infrastructure. Apple Inc. and the US Justice Department are in early discussions about settling a 2024 lawsuit that alleges the iPhone maker violated antitrust laws. Netflix Inc. forecast a second straight quarter of slowing sales growth, contributing to investor anxiety about the streaming giant’s future. SpaceX said it will aim to launch its Starship rocket again in a few days after aborting Thursday’s mission when some of its engines didn’t fire up. Alcoa Corp. cut its production forecast for alumina after operational problems at an Australian refinery weighed on output, overshadowing a quarter in which higher aluminum prices helped lift its revenue. Some of the main moves in markets:
Stocks
The S&P 500 fell 0.9% as of 3:03 p.m. New York time The Nasdaq 100 fell 1.3% The Dow Jones Industrial Average fell 0.7% The MSCI World Index fell 0.9% Philadelphia Stock Exchange Semiconductor Index fell 1.3% Currencies
The Bloomberg Dollar Spot Index was little changed The euro was little changed at $1.1436 The British pound fell 0.2% to $1.3454 The Japanese yen was little changed at 162.43 per dollar Cryptocurrencies
Bitcoin rose 0.1% to $64,170.26 Ether fell 1.4% to $1,843.8 Bonds
The yield on 10-year Treasuries declined one basis point to 4.54% Germany’s 10-year yield was little changed at 3.13% Britain’s 10-year yield declined one basis point to 4.95% Commodities
West Texas Intermediate crude rose 4% to $82.10 a barrel Spot gold rose 0.8% to $4,007.98 an ounce ©2026 Bloomberg L.P.
