Chip Stocks Hit by AI Spending Worries After Rally: Markets Wrap
(Bloomberg) — A selloff in chipmakers dragged down stocks amid concerns over whether massive artificial-intelligence investments will justify lofty valuations, with a resurgence in geopolitical risks also weighing on sentiment.
Wall Street’s best-performing corner this year was gripped by volatility that sent a gauge of powerhouses like Nvidia Corp. and Broadcom Inc. lower by 4.5%. A solid outlook from Taiwan Semiconductor Manufacturing Co. failed to inspire investors as the firm raised its spending forecast. The Nasdaq 100 fell 1.4%. While most S&P 500 shares rose, the index dropped.
Traders are grappling with whether tech stocks have grown too richly valued amid all the uncertainty over when trillions of dollars in spending will deliver lucrative returns. The four biggest US AI operators including Meta Platforms Inc. and Alphabet Inc. are expected to spend more than $725 billion this year alone.
The fact that TSMC is seeing such a negative response to strong numbers must be raising concerns about this all-important leadership group among investors, according to Matt Maley at Miller Tabak.
“The action in the chip stocks going forward is still the most-important issue for the stock market,” he said. “They are definitely showing some meaningful cracks, so they’re going to have to see a strong and sustainable rebound soon or it will raise some real warning flags.”
Heightened geopolitical threats also kept a lid on risk appetite, with the US intensifying strikes against Iran. Brent oil hovered near $85, raising concern about future inflationary pressures that could make the Federal Reserve boost rates before the year is over. Bond yields rose alongside the dollar.
Traders also parsed some key economic reports. Jobless claims fell last week while retail sales rose modestly in June, dragged down by a drop in gas-station receipts that masked strong gains at some merchants.
“Despite challenges, consumers are still spending and the labor market shows no signs of cracking,” said Ellen Zentner at Morgan Stanley Wealth Management. “This type of data won’t move the Fed’s needle either way, but it underscores the ongoing resilience of the US economy.”
Consumer spending is a critical engine, and investors want to see households continue opening their wallets, according to Bret Kenwell at eToro. June’s retail sales report was not particularly robust, but it was not a red flag either — especially given the upward revision to May, he said.
“Earnings should help separate signals from noise, revealing whether consumers remain resilient or are finally starting to pull back,” Kenwell concluded.
Corporate Highlights:
United Airlines Holdings Inc.’s outlook came in short of expectations, highlighting how a spike in fuel costs is overshadowing strong travel demand. UnitedHealth Group Inc. boosted its outlook for the year and reported quarterly profit well ahead of Wall Street’s views. Abbott Laboratories raised its guidance after a solid second quarter driven by improved performance across most of its business lines. Merck & Co. won US regulatory approval of a pill that rivals powerful injections for cutting dangerous cholesterol levels. Eli Lilly & Co. agreed to buy AtaiBeckley Inc. for as much as $3.8 billion, underscoring interest in the once-fringe area of psychedelic medicine. Uber Technologies Inc. agreed to buy Delivery Hero SE in a deal that values the German company at $14.8 billion. JB Hunt Transport Services Inc.’s results signaled stronger freight rates and tighter trucking capacity are starting to flow through to earnings. What Bloomberg Strategists Say…
“The rout in chip stocks is near a threshold that signaled recoveries in recent years. Yet those prospects hinge on hyperscalers continuing to raise projections for massive AI capex.”
—Tatiana Darie, Macro Strategist, Markets Live. For the full analysis, click here.
Some of the main moves in markets:
Stocks
The S&P 500 fell 0.3% as of 1:05 p.m. New York time The Nasdaq 100 fell 1.4% The Dow Jones Industrial Average was little changed The MSCI World Index fell 0.3% Currencies
The Bloomberg Dollar Spot Index rose 0.2% The euro fell 0.3% to $1.1432 The British pound fell 0.6% to $1.3462 The Japanese yen fell 0.2% to 162.50 per dollar Cryptocurrencies
Bitcoin fell 0.9% to $64,325.31 Ether fell 2.5% to $1,874.51 Bonds
The yield on 10-year Treasuries advanced two basis points to 4.57% Germany’s 10-year yield advanced one basis point to 3.13% Britain’s 10-year yield advanced three basis points to 4.97% Commodities
West Texas Intermediate crude fell 0.8% to $78.94 a barrel Spot gold fell 1.7% to $3,990.59 an ounce ©2026 Bloomberg L.P.
