Chip selloff erases $1 trillion as jobs data spurs rate fears

The PHLX semiconductor index slumped 8.5%, its deepest drop since April 2025, erasing over $1 trillion after a hot jobs report fueled Fed rate hike bets.

"You have had a lot of people here that were blindly buying the dip. Blindly buying the dip had been winning you money, but that ended today," said Dennis Dick, a proprietary trader at Triple D Trading.

The selloff swept across the semiconductor complex. Nvidia fell 6.2%, losing more than $300 billion in market capitalization, while Micron Technology tumbled 13.25% and AMD dropped 10.86%. Intel lost 11.28%, and Marvell Technology gave back 12%. Broadcom extended its two-day decline to 19% after its quarterly report on Wednesday showed demand for custom AI chips falling short of expectations. The broader market also sank, with the S&P 500 falling 2.65% to 7,383.68 and the Nasdaq Composite losing 4.18% to 25,709.43. The Dow Jones Industrial Average declined 1.35% to 50,866.78.

Friday's selloff had two triggers. The Labor Department reported nonfarm payrolls rose by 172,000 in May, more than double the 80,000 consensus estimate, dashing expectations that the Fed would cut rates this year. The data pushed the 10-year Treasury yield higher, while the dollar strengthened against major currencies. WTI crude fell 2.7% to $90.54 a barrel on easing US-Iran tensions, offering little relief to energy-exposed portfolios. Gold also declined as the stronger dollar weighed on precious metals.

The Philadelphia Stock Exchange semiconductor index's 8.5% decline was its steepest since the "Liberation Day" tariff-driven selloff in April 2025. Among the hardest hit were memory chip makers: the memory chip and hardware supply chain index closed down 10.92% at 198.69 points, with Rambus falling 14.20%, Micron dropping 13.25%, and SanDisk and Teradyne each losing at least 11.39%. Western Digital fell 11.08%, while Lam Research, Applied Materials, and Seagate Technology each declined at least 8.48%. The breadth of the decline was remarkable — every single constituent of the memory chip index finished in negative territory.

All 11 S&P 500 sectors finished lower, with information technology and communication services bearing the brunt of the selling. Defensive sectors such as utilities and consumer staples held up relatively better but still posted declines, pointing to broad-based risk aversion rather than a simple rotation out of growth stocks. The Cboe Volatility Index surged during the session as the selloff accelerated into the close, reflecting heightened demand for portfolio protection. Trading volume across US exchanges was well above the 20-day average as investors rushed to rebalance positions ahead of the weekend.

The rout shows how concentrated the market's gains have become in AI-related names, leaving the broader index vulnerable to sector-specific shocks. The PHLX chip index remains up 75% year to date even after Friday's losses, but the two-day slide of more than 10% points to growing investor caution. Next week brings two major events that could reshape capital flows: SpaceX's blockbuster IPO at a $1.75 trillion valuation and the Federal Reserve's June policy meeting on June 17-18, where the stronger jobs data may shift the rate outlook. For investors who rode the AI trade to multiyear highs, Friday served as a reminder of how quickly momentum can reverse when expectations collide with reality.

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