The Nasdaq Composite fell 1.5% on July 16 as chip stocks tumbled for a second consecutive day, dragging the broader stock market lower despite a flurry of earnings reports and signs of labor-market resilience in today’s stock market close.
The S&P 500 declined 0.51% while the Dow Jones Industrial Average slipped 0.2%, snapping two-day winning streaks. The tech-heavy Nasdaq’s steeper decline reflected renewed pressure on semiconductor stocks, which have become a focal point for investor anxiety about the sustainability of artificial intelligence spending.
Taiwan Semiconductor Manufacturing Company (TSMC), the world’s largest contract chipmaker, reported better-than-expected second-quarter results and raised its full-year capital expenditure forecast to $60 billion to $64 billion, up from $52 billion to $56 billion. The company also announced plans to invest another $100 billion in its Arizona operations. Yet TSMC shares slipped more than 2% despite the strong results, signaling that markets have moved past celebrating solid earnings to questioning whether the pace of AI infrastructure spending can justify current valuations.
Memory stocks bore the brunt of the selling. SK Hynix shares fell roughly 14% following a 9% decline the prior session, while SanDisk and Seagate Technology each dropped more than 10% after sharp losses on Wednesday. The Roundhill Memory ETF (DRAM) declined nearly 9%. The iShares Semiconductor ETF (SOXX) fell 4.5%, and the PHLX Semiconductor Index slid 3%.
The chip selloff extended a pattern that began in early July. When semiconductor stocks posted their worst two-day decline in a month around July 1-2, the sector erased over $1.3 trillion in market value, according to reports at the time. That initial rout was attributed to concerns over the sustainability of hyperscaler debt-funded AI spending and questions about whether valuations had gotten ahead of fundamentals. Today’s decline suggests those worries persist even as major chipmakers report strong demand and raise capital-spending guidance.
Alphabet shares sank more than 4% after Bloomberg reported that Google’s AI unit was months behind schedule delivering Gemini 3.5 Pro, its most powerful AI model. The delay underscored investor concerns about execution risk in the AI buildout. Five of the Magnificent Seven mega-cap tech stocks finished lower, with SpaceX closing below its initial public offering price for the first time.
Economic data offered some bright spots. U.S. retail sales rose 0.2% in June, matching economist estimates, while jobless claims for the week ended July 11 came in at 208,000, lower than expected. These readings suggested consumer spending and labor-market resilience despite broader market uncertainty. Ellen Zentner, Chief Economic Strategist for Morgan Stanley Wealth Management, said in written commentary: “Despite challenges, consumers are still spending and the labor market shows no signs of cracking.”
Oil prices fell modestly as traders assessed Middle East developments. West Texas Intermediate futures declined 0.7% to $79 a barrel, while Brent crude slipped 0.8% to $84.25 a barrel. The 10-year Treasury yield rose one basis point to around 4.57%.
Sources
- Yahoo Finance — Nasdaq decline to 1.5%, chip stock pressure, TSMC earnings miss in market sentiment, Alphabet decline, memory stock losses
- Investopedia — Market close data, chip stock declines, SK Hynix and memory stock losses, TSMC earnings and capex guidance, Alphabet delay report, economic data on retail sales and jobless claims
- MarketWatch — Nasdaq close at 25,881.95, down 387.28 points or 1.5%
