Nasdaq 100 enters correction as chip rout deepens 15%

The Nasdaq-100 fell into correction territory, dropping more than 10% from its record high, as a deepening semiconductor rout split the market. Dow futures jumped 464 points, or 0.9%, buoyed by strong blue-chip earnings from Sherwin-Williams and Coca-Cola, while S&P 500 futures edged up 0.1%.

"When one trade becomes this crowded, investors don't wait for bad news; they simply need a reason to take profits," said Violeta Todorova, senior research analyst at Leverage Shares. "After an extraordinary rally, expectations had become almost flawless. When valuations leave no room for disappointment, even small changes in sentiment can trigger deep corrections."

The VanEck Semiconductor ETF slid 3%, extending its longest losing streak this year to four sessions. Micron Technology and Western Digital each fell about 5%, while Seagate Technology and Astera Labs also traded lower. The Philadelphia Semiconductor Index retreated for a fourth straight day, and the MSCI World Semiconductor Index has plunged more than 15% this month — its worst performance since 2022.

The selloff raises the stakes for this week's Big Tech earnings, with Amazon, Meta Platforms, Microsoft and Apple all reporting. Investors are looking for evidence that hyperscaler capital spending can sustain the chip rally, while the Federal Reserve's Wednesday decision on interest rates adds another layer of uncertainty for growth stocks.

Global Chip Rout Spreads to Asia

The semiconductor selloff went global, with South Korea's Kospi sinking 10% and triggering two trading halts. Memory giants Samsung Electronics and SK Hynix each slid more than 14%. Japan's Nikkei 225 fell 4%, while Taiwan's Taiex dropped about 4%. In Europe, Infineon Technologies fell 6.9% and ASML Holding dropped 3.4%, extending a pullback triggered by reports that a Chinese state-backed company had begun mass-producing immersion deep ultraviolet lithography machines for chipmaking.

Wall Street Stays Bullish on AI Despite Pullback

Morgan Stanley remained in the AI bull camp, calling the pullback a positioning reset rather than a fundamental warning. The firm sees AI compute demand outstripping supply for years, with capability gains and long-term infrastructure spending keeping the supply-chain setup attractive. Still, positioning risks are rising. Bullish bets on Nasdaq-100 futures remain largely loss-making, according to Citigroup data, and exposure to South Korea's Kospi index is fragile, with existing long positions deeply in the red. Nvidia shares fell 0.9% on Tuesday, and the cost of protecting the company's debt against default surged by a record on Monday, signaling that credit markets are noticing risks the equity market has not yet fully priced.

This article is for informational purposes only and does not constitute investment advice.