Global stock markets faced downward pressure on Thursday and into the overnight session, driven largely by a sharp selloff in the semiconductor sector and growing investor anxiety regarding the sustainability of artificial intelligence (AI) investments. Major U.S. benchmarks closed lower on Thursday, with the Nasdaq Composite leading the decline, falling 1.47% to close at 25,881.95. The S&P 500 shed 0.51% to finish at 7,533.77, while the Dow Jones Industrial Average dropped 0.20% to 52,552.97. The downward momentum extended into the overnight session, with Nasdaq-100, Dow, and S&P 500 futures all posting further losses.
The Semiconductor Rout
The recent market volatility has been heavily influenced by the technology sector, specifically chipmakers. The VanEck Semiconductor ETF (SMH) slumped nearly 4% on Thursday, contributing to a weekly decline of 6.9%. The selloff was triggered in part by Taiwan Semiconductor Manufacturing (TSM), which, despite reporting a 77% year-over-year jump in profit for the second quarter, saw its U.S.-listed shares fall by more than 2%. Investor sentiment was dampened by the company’s decision to significantly hike its 2026 capital expenditure forecast to a range of $60 billion to $64 billion, up from a previous estimate of $52 billion to $56 billion. This increased spending forecast fueled broader concerns that the massive capital requirements of AI development may not yield the expected profit and productivity gains. Other semiconductor names faced steeper declines, with Micron Technology, Advanced Micro Devices, Intel, and Broadcom each falling over 5%. Memory-chip makers were particularly hard hit, with Sandisk shares plunging more than 12% at the close.
For more on this story, see Global Markets: Semiconductor Stocks Struggle as Oil Prices Drop Sharply.
Weight of the Tech Sector
Analysts note that the concentration of chipmakers within major indices has magnified the impact of these daily fluctuations. Paul Nolte, a senior wealth advisor and market strategist at Murphy & Sylvest, noted that while the chip sector has soared nearly 70% this year, its weighting in the S&P 500 has expanded to over 20%, compared to roughly 8% just a few years ago.
It comes strictly down to the weight of the chips in the S&P 500,
Nolte said. If you look at the rest of the market, it's doing fine.
Despite the tech-led rout, some market participants remain optimistic. Arthur Cheong, CEO and Chief Investment Officer of DeFiance Capital, characterized the movement as a mid-cycle correction
rather than a full-cycle top, suggesting that the market could recover once the current period of volatility subsides. Ed Clissold, chief U.S. strategist at Ned Davis Research, added that the fact the S&P 500 remains roughly 1% below its all-time high suggests the market has not “fallen apart.”
This follows our earlier report, Global Stock Sell-Off: Nasdaq and S&P 500 Tumble Amid Tech Sector Retreat.
Read also: Asian Stocks Plunge Amid Middle East Tensions, Tech Sell-Off, and Inflation Fears.
Geopolitical and Economic Context
The economic landscape remains mixed. While U.S. retail sales figures and manufacturing activity in the Northeast showed resilience, the housing sector reported a drop in pending home sales. Meanwhile, the Bank of Korea implemented an interest rate hike—its first since 2023—which contributed to a 6.4% decline in South Korea’s Kospi index.
Earnings Season Performance
The broader market volatility occurs against the backdrop of a strong second-quarter earnings season. Many companies, including UnitedHealth Group and Abbott, reported results that topped analyst expectations. However, high valuations and a consensus that earnings growth may be nearing a peak have led some investors to remain cautious.