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 rout in semiconductor giants is set to be the worst since the April 2025 tariff meltdown, with an 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%.
Chip stocks had recently wrapped up their best-ever quarter, extending an extraordinary surge driven by insatiable demand for AI. But the sector has faced turbulence on concerns about increased competition, possible overcapacity and whether the billions of dollars in AI investments 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 rose while haven currencies including the Japanese yen and the Swiss franc outperformed. Geopolitical tensions also curbed the appetite for risk, with oil rising about 3% as the US and Iran intensified their attacks.
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.”
In another sign of rotation, most industries in the S&P 500 gained Friday. The gauge’s equal-weighted version — one that gives Target Corp. as much clout as Microsoft Corp. — remained at all-time highs amid solid corporate earnings and signs of economic resilience.
Data howed US consumer sentiment rose in early July to a five-month high as lower gasoline prices boosted morale. Housing starts surged in June after a sharp drop a month earlier, driven by a rebound in apartment construction. Still, manufacturing output stalled last month, held back by durable goods.
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 0.5% as of 10:26 a.m. New York time The Nasdaq 100 fell 1.2% The Dow Jones Industrial Average was little changed The Stoxx Europe 600 fell 0.6% The MSCI World Index fell 0.7% Philadelphia Stock Exchange Semiconductor Index fell 1.6% Bloomberg Magnificent 7 Total Return Index fell 2% S&P 500 Equal Weighted Index was little changed Currencies
The Bloomberg Dollar Spot Index was little changed The euro was little changed at $1.1439 The British pound fell 0.2% to $1.3450 The Japanese yen was unchanged at 162.39 per dollar Cryptocurrencies
Bitcoin fell 1.3% to $63,259.6 Ether fell 2.4% to $1,825.16 Bonds
The yield on 10-year Treasuries declined three basis points to 4.52% Germany’s 10-year yield declined two basis points to 3.12% Britain’s 10-year yield declined two basis points to 4.94% Commodities
West Texas Intermediate crude rose 3.3% to $81.54 a barrel Spot gold rose 0.6% to $4,000.23 an ounce ©2026 Bloomberg L.P.
