U.S. chip stocks plunge: Trillions wiped out overnight; Nvidia loses 300 billion

U.S. chip stocks suffer heavy losses, with market optimism about AI demand prospects showing clear signs of wavering.

On Friday, the Philadelphia Semiconductor Index closed down 10%, marking the largest single-day decline since March 2020, with the overall sector market value evaporating by more than $1 trillion.

Friday’s sell-off intensified the decline from Thursday, after Broadcom reported quarterly results showing that demand for its custom AI chips failed to meet extremely high expectations.

Better-than-expected employment data sparked concerns about the duration of high interest rates, further dampening overall risk sentiment, with the S&P 500 falling 2.3% that day.

Analysts note that as high-valued tech stocks come under pressure, Elon Musk’s SpaceX is preparing for a large-scale IPO next week with a valuation of $1.75 trillion, testing market tolerance for high-priced tech assets.

01 Leading stocks plummet, Nvidia’s market cap shrinks by over $300 billion in a single day

This round of sell-off affected almost all AI-related chip leaders. The world’s largest chip company by market value, Nvidia, fell about 6%, with its market cap evaporating over $300 billion in one day.

Memory chip giant Micron Technology declined 11%, losing about $127 billion in market value. Recently popular among investors, Marvell Technology retreated 12%, and Advanced Micro Devices (AMD) dropped 10.5%.

As one of the biggest beneficiaries of this AI investment boom, Broadcom fell another 7.5% on Friday, with a two-day decline totaling 19%.

02 Traders: The reckless bottom-fishing logic has come to an end

The immediate trigger for this round of decline was Broadcom’s quarterly earnings report. Broadcom disclosed that demand for its custom AI chips did not meet the high expectations previously set by the market, prompting a reassessment of the entire AI chip industry’s outlook. This triggered the initial sector sell-off on Thursday, with the decline further spreading on Friday.

This sharp drop indicates that investor confidence in high-valuation, high-growth tech stocks is weakening. Despite the significant correction this week, the Philadelphia Semiconductor Index has still gained 75% year-to-date.

Market sentiment shifts are also reflected in trading behavior. Dennis Dick, a proprietary trader at Triple D Trading, said:

"Previously, a lot of funds were blindly buying dips, and this strategy worked repeatedly. But today, it failed."

The combination of high interest rate expectations and uncertainty about AI demand has put the two main pillars supporting chip stocks’ continued rise under pressure. Investors are facing the need to reassess the risk premiums of tech stocks, especially as the market’s sensitivity to high-priced tech assets increases around the time SpaceX’s $1.75 trillion ultra-high valuation impacts the IPO market.