Chip Stocks Poised for Bear Market in AI Unwind: Markets Wrap
(Bloomberg) — A selloff in chipmakers gathered pace on Friday, driving the group that has led this year’s stock rally toward 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 the April 2025 tariff meltdown, with a key industry gauge sinking 20% from a record. A breakthrough from Chinese AI startup Moonshot further dented enthusiasm for the sector, which has also been hit by a rotation from richly priced tech names in favor of economically sensitive shares. The Nasdaq 100 lost 1.2%.
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, 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.
The slide rippled through global markets, spurring a rush for safety. Treasuries edged up while haven currencies including the Japanese yen and the Swiss franc outperformed. Geopolitical tensions also curbed the appetite for risk, with oil climbing as the US and Iran intensified their attacks.
While AI-related stocks have become more volatile as investors question both the pace and payoff of investments, 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 — and this is what we’re seeing right now.”
Corporate Highlights:
Apple Inc. is again the biggest company in the world after wresting the title from Nvidia Corp., which has held it since May 2025. Netflix Inc. sank after forecasting 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. Intuitive Surgical Inc. slid as growth in use of its da Vinci surgical robots slowed to the weakest pace in four years. Some of the main moves in markets:
Stocks
The S&P 500 fell 0.8% as of 12:08 p.m. New York time The Nasdaq 100 fell 1.2% The Dow Jones Industrial Average fell 0.3% The Stoxx Europe 600 fell 0.3% The MSCI World Index fell 0.8% Currencies
The Bloomberg Dollar Spot Index was little changed The euro was little changed at $1.1438 The British pound fell 0.3% to $1.3442 The Japanese yen was little changed at 162.46 per dollar Cryptocurrencies
Bitcoin fell 1.2% to $63,323.81 Ether fell 2.4% to $1,825.68 Bonds
The yield on 10-year Treasuries was little changed at 4.55% 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 $82.11 a barrel Spot gold rose 1% to $4,016.16 an ounce ©2026 Bloomberg L.P.
