US Chip Stocks Lose $1.3 Trillion in One-Day Rout, Stirring ‘Black Monday’ Fears

‘Black Monday’ fears mount

US chip stocks lose $1.3 trillion in market value

Semiconductor shares that had been among the biggest beneficiaries of the artificial-intelligence boom on Wall Street plunged across the board on June 5, wiping out about $1.3 trillion in market value in a single session.

The rout followed a growing view that Broadcom’s AI semiconductor business was not expanding as fast as investors had expected. Stronger-than-expected US jobs data also fueled concern that interest rates could stay higher for longer, further hurting sentiment.

The Philadelphia Semiconductor Index, which tracks 30 major US chip companies, fell 10.3% that day, Reuters reported. It was the index’s biggest one-day drop since March 2020, when the Covid-19 shock hit financial markets.

Even after the selloff, the Philadelphia Semiconductor Index was still up 73% from the start of the year.

The decline accelerated after Broadcom’s latest earnings report led investors to conclude that demand for its custom AI chips had fallen short of market expectations.

Nvidia, the leading AI chip stock, fell about 6%, wiping out more than $300 billion in market value. Micron plunged 13%, cutting about $150 billion from its market capitalization. Marvell Technology dropped 17% and AMD slid 11%. Broadcom also fell nearly 8%, extending its loss over the past two sessions to almost 20%.

Rising caution over richly valued technology shares also contributed to the chip selloff. With Elon Musk’s space company SpaceX pursuing a massive initial public offering, investors were also believed to be locking in some profits. SpaceX’s estimated valuation has been discussed at about $1.75 trillion.

Strong US labor-market data added to the pressure. The Labor Department said May nonfarm payrolls rose by 172,000 from the previous month, far above the market forecast of 80,000.

The stronger-than-expected employment report weakened expectations for Federal Reserve policy easing. The resulting rate pressure weighed on investor appetite for technology shares more broadly.

After the sharp drop on Wall Street, South Korea’s stock market also appears set to face pressure on June 8.

The Kospi closed at 8,160.59 on the previous trading day, down 478.82 points, or 5.54%, from the prior session. The 478.82-point decline was the third-largest on record.

Kim Yeon-ji, Hankyung.com reporter kongzi@hankyung.com