Nasdaq 100 slides 1.4% toward correction on China chip fears

The Nasdaq 100 fell 1.4% to 27,690.60, nearing correction, as a chip rout sparked by China's semiconductor advances spread across global markets. The S&P 500 edged down 0.06% to 7,421, while the Dow Jones Industrial Average rose 0.75% to 52,653.60, lifted by strong earnings from Sherwin-Williams and Coca-Cola.

"The selloff reflects a genuine reassessment of competitive dynamics in memory and logic chips," said Peter Elstrom, a technology analyst at Bloomberg. "China's progress is no longer theoretical — CXMT's 465% IPO surge made it visible to every portfolio manager."

The VanEck Semiconductor ETF dropped 3%, with Micron Technology and Western Digital each sliding about 5%. The rout extended to Asia, where South Korea's Kospi sank 10%, triggering two trading halts, and Japan's Nikkei 225 fell 4% to 62,501.30. The Dow's gain against the tech-heavy Nasdaq's decline highlighted the narrowness of the selloff, with blue-chip earnings providing a buffer that semiconductor names lacked.

The Nasdaq 100 is now more than 10% below its record high, meeting the standard definition of a correction. The decline comes as Amazon, Meta Platforms, Microsoft and Apple prepare to report quarterly results this week, with investors watching whether hyperscaler capital spending can sustain the chip rally. The Federal Reserve's Wednesday rate decision gives traders another focus, with markets looking for signals on September policy. PayPal bucked the tech weakness, beating Q2 estimates on adjusted earnings, revenue and payment volume while raising its full-year profit outlook.

ChangXin Memory Technologies, or CXMT, surged 465% on its Shanghai debut Monday, the largest IPO in mainland Chinese semiconductor history. The company raised 57.92 billion yuan, or about $8.6 billion, and closed with a market capitalization near $460 billion to $488 billion. CXMT now holds roughly 7.6% of the global DRAM market, up from 4.7% a quarter earlier, and is on track to exit 2026 with about 350,000 wafer starts per month — within roughly 25,000 of Micron's capacity.

The catch: more than 98% of CXMT's revenue comes from commodity DRAM, with no presence in high-bandwidth memory, the AI-accelerator product where Micron dominates. SemiAnalysis data shows CXMT's DDR5 cost-per-bit remains more than 30% above peers, and analysts view the company as at least one generation behind in HBM. Micron's HBM capacity is sold out through 2026, with demand exceeding supply by an estimated 50% to 67%.

Morgan Stanley remains 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 wider adoption keeping the supply-chain setup attractive. UBS analyst Timothy Arcuri lifted his Micron price target from $535 to $1,625, citing a "structurally durable" HBM supply-demand imbalance. Goldman Sachs estimates a 2026 DRAM supply-demand gap of 4.9%, the most severe shortage in 15 years, with DRAM spot prices up 52% since January.

With Big Tech earnings and the Fed decision ahead, the semiconductor sector faces its most consequential week since the AI rally began.

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