US semiconductor stocks plunged sharply, wiping out $1.3 trillion in market value after Broadcom's weak earnings report spooked investors and pushed the PHLX chip index down by over 10% in a single day.
- PHLX chip index drops 12% in two sessions, largest one-day loss since March 2020
- Broadcom's weak report triggers selloff in AI-focused chip stocks
- Nvidia loses $300 billion of market cap, Micron down 13%, AMD nearly 11%
What happened
US semiconductor stocks experienced a dramatic selloff, losing approximately $1.3 trillion in market capitalization following a disappointing earnings report from Broadcom. This report indicated weaker-than-expected demand for its custom AI chips, causing investor concern to cascade across the sector.
The PHLX chip index suffered a 10.3% drop on Friday, marking its steepest one-day decline since the market turmoil at the onset of the COVID-19 pandemic in March 2020. Over two trading sessions, the index fell by a cumulative 12%, signaling heightened investor anxiety over tech valuations.
Why it matters
This sharp decline highlights growing investor skepticism regarding the lofty valuations that semiconductor and AI-related technology stocks have reached this year. Despite trading at record highs earlier in the week, the swift downturn underscores the fragile confidence in a sector heavily weighted by prominent names like Nvidia and AMD.
The selloff also coincides with macroeconomic pressures, including stronger-than-expected US jobs data and concerns about rising interest rates, which have contributed to broader stock market volatility. These factors collectively raise questions about the sustainability of the recent tech rally.
What to watch next
Investors will be closely monitoring upcoming earnings reports from other semiconductor companies to gauge whether the sector can stabilize or if further corrections lie ahead. The performance of AI chip suppliers remains critical as AI continues to drive a significant portion of chip demand growth.
Attention will also turn to Elon Musk’s anticipated SpaceX initial public offering, valued at $1.75 trillion. Market response to this high-profile IPO amid ongoing chip sector volatility will provide insight into investor appetite for big-ticket tech listings during uncertain economic conditions.