U.S. stocks splintered Tuesday as a violent global sell-off in semiconductor shares hammered the Nasdaq, even as a rotation into defensive sectors and small caps kept the Dow Jones in positive territory through midday trading.
The sell-off began overseas, where South Korea's KOSPI index — as tracked by the iShares South Korea ETF (EWY) — plunged nearly 10% as investors dumped chip leaders Samsung Electronics and SK Hynix amid regulatory signals that the sector's AI-fueled rally had run too hot. Japan's Nikkei 225 fell 3.6% and Hong Kong's Hang Seng dropped 1.8%, setting an already risk-off tone before the open.
The message stateside was the same: traders are questioning whether the AI trade has overextended.
Concerns crystallized after Alphabet Inc. (GOOGL) slid roughly 5% on renewed scrutiny of heavy AI infrastructure spending, dragging megacap sentiment lower ahead of Thursday's PCE inflation print and Micron Technology Inc. (MU)'s earnings on Wednesday.
The S&P 500 fell 0.9% to 7,403.94, while the Dow Jones bucked the trend, edging up 0.2%, or roughly 118 points, to 51,831 as its lighter chip exposure and heavier defensive tilt cushioned the blow.
The Nasdaq 100 took the brunt, sinking 2.4%, or about 739 points, to 29,608. Within the Magnificent Seven stocks, NVIDIA Corp. (NVDA) led the declines, falling 3.2%. The Russell 2000 fell just 0.7% to 2,984.90.
Tuesday's Performance In Major U.S. Indices
According to market data:
Semiconductors Bleed As Defensives, Software Catch The Bid
The session was a textbook defensive rotation.
The Consumer Staples Select Sector SPDR Fund (XLP) led all sectors, rising 1.7%, followed by the Real Estate Select Sector SPDR Fund (XLRE), up 1.4%, and the Health Care Select Sector SPDR Fund (XLV), up 0.9%. Utilities, financials and energy also finished higher.
At the other end, the Technology Select Sector SPDR Fund (XLK) cratered 3%, its losses driven almost entirely by chips while software names held firm. Industrials and consumer discretionary also slipped. Among industry funds, the VanEck Gold Miners ETF (GDX) was the day's biggest loser, down 3.2% alongside the gold rout, and the Invesco WilderHill Clean Energy ETF (PBW) fell 3%.
On the upside, the SPDR S&P Insurance ETF (KIE) gained 2.1%, the iShares Biotechnology ETF (IBB) rose 1.3%, and the U.S. Global Jets ETF (JETS) added 1.2%.
The carnage in the VanEck Semiconductor ETF (SMH) read like a casualty list.
Sandisk Corp. (SNDK) plunged 11.5% to lead the Russell 1000, tracking the global memory-chip sell-off sparked by the KOSPI rout.
Micron Technology Inc. sank 9.5% as the same memory-pricing fears collided with de-risking ahead of its quarterly results due after Wednesday's close.
Corning Inc. (GLW) dropped 8.9%, as an AI-optical supply-chain name in the broad semiconductor liquidation.
ON Semiconductor Corp. (ON) fell 8.9% and Lam Research Corp. (LRCX) slid 8.8%.
Fellow chip-equipment and AI-infrastructure names took heavy hits too, including KLA Corp. (KLAC), Applied Materials Inc. (AMAT), Marvell Technology Inc. (MRVL), Vertiv Holdings Co (VRT) and GE Vernova Inc. (GEV).
Crucially, the bleeding was a chip story, not a broader tech story: software held up and even rallied as money rotated within the sector. Cloudflare Inc. (NET) rose 5% and ServiceNow Inc. (NOW) climbed 4%.
On the winners' board, Rubrik Inc. (RBRK) rose 6% after Baird lifted its price target to $110 from $100 and reiterated an Outperform rating following results that topped all guided metrics.
On the earnings docket, Carnival Corp. (CCL) slumped 6% after reporting fiscal second-quarter results, while FedEx Corp. (FDX) and homebuilder KB Home (KBH) are scheduled to post after the close.
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