U.S. Chip Stocks Lose Over $1 Trillion in Market Value in a Single Day; Philadelphia Semiconductor Index Posts Largest One-Day Drop in Six Years
The Philadelphia Semiconductor Index closed down 10% on Friday, marking its largest one-day drop since March 2020. The sector's total market capitalization evaporated by over $1 trillion, with NVIDIA alone losing more than $300 billion in market value in a single day. The core reasons were growing market concerns about demand for AI chips and rising expectations of Federal Reserve interest rate hikes driven by strong employment data
U.S. chip stocks suffered a heavy setback, as optimistic market expectations for the future of AI demand showed clear signs of wavering.
On Friday, the Philadelphia Semiconductor Index closed down 10%, recording its largest one-day drop since March 2020, with the sector's total market capitalization evaporating by over $1 trillion.
Friday's sell-off intensified the decline from Thursday, after Broadcom's quarterly report revealed that demand for its custom artificial intelligence chip business failed to meet ultra-high expectations.
Employment data that exceeded expectations sparked concerns about the duration of high interest rates, further dampening overall risk sentiment. The S&P 500 Index fell 2.3% on the day.
Analysts pointed out that as highly valued tech stocks come under pressure, Elon Musk's SpaceX is preparing for a large-scale IPO next week at a valuation of $1.75 trillion, testing the market's tolerance for pricing high-priced tech assets.
Leading Stocks Plunge; NVIDIA Loses Over $300 Billion in Market Value in a Single Day
This round of sell-offs affected nearly all leading AI-related chip companies. NVIDIA, the world's most valuable chip company, fell about 6%, wiping out over $300 billion in market value in a single day.
Memory chip giant Micron Technology dropped 11%, losing approximately $127 billion in market value. Marvell Technology, recently favored by investors, retreated 12%, while Advanced Micro Devices (AMD) fell 10.5%.
Broadcom, one of the biggest beneficiaries of this AI investment boom, fell another 7.5% on Friday, bringing its two-day cumulative decline to 19%.
Traders: Blind "Buy the Dip" Logic Comes to an End
The direct trigger for this downturn was Broadcom's quarterly earnings report. Broadcom disclosed that growth in demand for its custom AI chip business failed to meet the high benchmark previously set by the market, prompting investors to reassess the prosperity of the entire AI chip supply chain. This triggered the initial round of sector sell-offs on Thursday, with the decline spreading further on Friday.
This sharp drop indicates that investor confidence in high-growth tech stocks with elevated valuations is shaking. Even after this week's significant correction, the Philadelphia Semiconductor Index is still up 75% year-to-date.
The shift in market sentiment is also reflected in trading activity. Dennis Dick, a proprietary trader at Triple D Trading, stated:
"Previously, there was a large amount of capital blindly buying on dips, a strategy that once worked time and again, but today it failed."
The combination of high interest rate expectations and uncertainty surrounding AI demand has simultaneously put pressure on the two core logics that previously supported the continuous rise of chip stocks. Investors are facing pressure to reassess the risk premium of tech stocks, especially around the time when SpaceX is hitting the IPO market with an ultra-high valuation of $1.75 trillion, significantly increasing the market's sensitivity to the pricing of high-priced tech assets.
