The broader market mood is once again looking more mixed, in trying to digest US-Iran developments this week. But in the context of US equities, there is a different narrative running as we saw a sharp selloff in semiconductor stocks yesterday.
Dip buyers managed to salvage things right before the close but there were still some steep losses for the likes of Broadcom (-12.6%) and Micron (-7.7%). And we’re seeing more of that once again today, with Nasdaq futures down 0.9% but Dow futures being up by 0.2% as the rotation into value sectors continue to play out.
In pre-market trading, Broadcom is down by 1.2%, Micron down 2.4%, and AMD down 2.3%. Nvidia is also down a little over 1% in dragging the overall market mood for the time being. That despite the strong recovery yesterday for the poster boy of the big tech rally.
This is not to say that the AI trade is being thrown out the window. It looks more to be a healthier reset. That as investors demand nothing short of perfection especially with already extremely lofty valuations.
Broadcom’s guidance this week was a key trigger in that respect, projecting just $16 billion in AI chip revenue for the next quarter. That’s a miss on estimates hoping for at least $17 billion or better. And besides that, the company’s management refused to raise its full-year AI revenue targets. That was the big blow as investors are so accustomed to expect exponential growth quarter after quarter.
In essence, that was a signal that perhaps we are starting to see the big spending on AI infrastructure start to bite at the bottom line for big tech. And if so, we might just see more companies plateauing moving forward. It finally looks like we’re starting to get to the “show me the money” stage in the AI trade.
But just as it is quick to drop, just be wary that sentiment can just as quickly turn on a dime as well. We’ve seen it all too often in this market. It doesn’t take long for things to echo through before the dip buying begins again
