Investors are aggressively offloading U.S. technology shares, selling off chipmakers, memory companies, and other high-flying stocks that have driven the market's gains this year.
A fresh wave of market turbulence swept across trading floors on Thursday, with the Nasdaq Composite Index falling 1.5%. Shares of memory and hard drive manufacturers were hit particularly hard, with SanDisk, Western Digital (WDC), and Seagate Technology PLC (STX) all dropping more than 9%. Chipmakers like Intel (INTC) and Micron Technology (MU) saw their shares slide around 6%.
The sell-off spread to Asian markets, with Japanese memory chipmaker Kioxia plunging 16% on Friday and the Nikkei 225 index falling 5%. South Korean markets, which have been among the most volatile due to AI-related trading, were closed for a holiday.
Futures data indicated the Nasdaq 100 and S&P 500 indexes were poised to open lower on Friday, down 1.3% and 0.8% respectively.
This latest wave of selling in tech stocks signals growing investor skepticism over the sky-high valuations of companies at the heart of the artificial intelligence boom. It also reflects that some traders are unwinding highly leveraged bets—positions that use substantial borrowing to amplify gains and carry significant volatility risk.
Nikolaos Panigirtzoglou, a strategist at JPMorgan, noted, "The investor de-leveraging process that began in June is continuing. There remains further de-leveraging potential in leveraged equity ETFs, options, and margin accounts, which will continue to weigh on the stock market."
Taiwan Semiconductor Manufacturing (TSM) reported a 77% surge in quarterly net profit on Thursday and announced an additional $100 billion investment to expand its U.S. capacity. However, its Taiwan-listed shares tumbled more than 7% on Friday.
IBM (IBM) plunged over 20% on Tuesday, a drop exceeding its performance during the Black Monday crash of 1987. This followed a profit warning from the company, citing clients cutting budgets for traditional systems to invest in AI infrastructure instead.
An analyst at research firm Vital Knowledge commented, "Tech stocks are now in a difficult position, where blowout earnings fail to lift share prices, while any disappointment triggers a severe sell-off."
SpaceX, which completed a record $86 billion IPO last month and is a representative play in the current AI investment frenzy, continued its retreat, closing down 3.1% at $131.11.
Meanwhile, Goldman Sachs's momentum stock index for U.S. equities fell 6%, bringing its cumulative decline for the month to 20%.
Shares of the mega-cap tech companies spending heavily to build data centers for the next generation of AI models also weakened: Alphabet (GOOGL) fell 4.4%, and Amazon.com (AMZN) declined 1.2%. In recent weeks, market concerns have grown over the massive debt and expansion plans of these hyperscale cloud providers, putting pressure on the prices of bonds they have issued.
Additionally, investors are closely monitoring the escalating conflict between the U.S. and Iran. On Thursday afternoon, the U.S. conducted strikes against Iran for the sixth consecutive day.
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