Semiconductor Stocks Sink for Second Day as Wall Street Eyes Rotation Into Cyclicals

Semiconductor stocks plunged for a second straight day in US trading, with Wall Street increasingly focused on whether a rotation out of technology and into economically sensitive sectors will persist.

Concerns about a pullback in artificial intelligence infrastructure spending by hyperscalers spread after reports that Meta Platforms Inc. is considering a cloud business that would sell excess AI computing capacity to outside customers. The news fueled selling in semiconductor shares, the biggest beneficiaries of the AI investment cycle. Even so, investors largely viewed the move as a correction in overcrowded technology positions rather than a sign that AI spending is ending.

The Philadelphia Semiconductor Index fell 5.54%, extending its two-day drop to more than 11%. Marvell Technology sank 9.84%, Arm Holdings slid 6.58%, Micron Technology lost 5.50%, Intel dropped 5.25% and Advanced Micro Devices fell 4.26%. Nvidia also ended down 1.39%. Meta, which had surged the previous day, declined 4.90%.

Money instead flowed into relatively neglected sectors such as financials, industrials, health care and consumer staples. The Dow Jones Industrial Average rose 1.14% to a record high, and the equal-weighted S&P 500 also closed at an all-time high. The tech-heavy Nasdaq fell 0.80%, but the selloff did not spread across the broader market.

On Wall Street, many viewed the latest pullback as portfolio repositioning rather than a slowdown in AI investment. Tom Lee, co-founder of Fundstrat, said investors are rebalancing portfolios at the start of a new quarter. He added that opportunities could emerge in cyclical shares such as industrials and financials, as well as in stocks that had previously lagged.

The case for the AI investment cycle also remained intact. Jefferies, Bank of America and Wells Fargo said Meta's use of idle computing capacity could improve investment efficiency and serve as a strategy to sustain future AI infrastructure spending. Mark Yu of Blue Whale Capital said investors should pay more attention to companies benefiting from AI investment than to those making the spending itself. He identified memory semiconductors as a long-term beneficiary.

Attention is also turning to SK Hynix's American depositary receipt listing scheduled for July 10. With sentiment toward AI chip investment recently shaken, the market is watching whether SK Hynix can help revive appetite for memory shares.