Major U.S. stock indexes turned lower Tuesday as a rally in chip stocks fizzled, extending weakness that began after Broadcom’s disappointing earnings report last week sparked a broader semiconductor selloff.
The tech-heavy Nasdaq Composite and S&P 500 opened higher but were 0.8% and 0.3% lower, respectively, in recent trading, according to Investopedia. The Dow Jones Industrial Average rose 0.2%. The retreat came after chip stocks rebounded Monday, with the iShares Semiconductor ETF surging nearly 6%, but momentum couldn’t hold Tuesday.
The selloff traces back to Broadcom’s fiscal Q2 2026 earnings report released June 4, which triggered the initial wave of semiconductor weakness. Broadcom projected third-quarter AI chip sales of $16 billion, missing analyst expectations of $17.2 billion, and did not raise its 2026 AI revenue forecast. Shares of the chipmaker plunged 14%, marking its worst earnings-day decline on record, according to Bespoke Investment Group.
The weakness cascaded across the sector. U.S.-traded chipmakers lost over $1 trillion in market value on Friday, June 5, when the Nasdaq Composite fell 4% for its biggest decline since April 2025, according to Reuters and multiple financial outlets. AI chip favorites including Nvidia, Micron, and AMD all posted steep losses as investors reassessed recent gains in the semiconductor space.
Tuesday’s pullback reflects profit-taking, a common market behavior when investors lock in gains after stocks rise sharply. Investors often follow a 20%-25% profit-taking rule, selling positions once they reach those thresholds to secure returns. The rally in chip stocks had been extreme—the iShares Semiconductor ETF had reached its 32nd record close of 2026 just days before the Broadcom miss.
Oil prices pulled back Tuesday, declining nearly 4% to $87.75 a barrel, after President Donald Trump said a deal between the U.S. and Iran to end their war could be reached in “two or three days.” West Texas Intermediate futures, the U.S. crude benchmark, retreated as geopolitical tensions eased.
Investors’ attention will turn Wednesday to the May Consumer Price Index reading. Economists expect it to show inflation rose 4.2% year-over-year, which would be the highest annual increase since April 2023, according to a survey by Dow Jones Newswires and The Wall Street Journal.
Sources
- Investopedia — reported Tuesday’s market moves, chip-stock fading, and oil price retreat
- Reuters — confirmed $1.3 trillion in market value lost by U.S.-traded chipmakers and Broadcom’s earnings miss
- Intellectia AI — detailed Broadcom’s AI networking revenue miss ($4.1B vs. $4.8B expected) as the selloff trigger
- Benzinga — reported Nasdaq 100 tumbled 3.2% on June 5 for its worst daily decline since October 2025
- Moomoo — explained the 20%-25% profit-taking rule investors use to lock in gains
