Nasdaq 100 futures fell 0.73% on Tuesday as the chip selloff that halted trading on South Korea’s Kospi reached US tech stocks. Micron, Marvell and AMD all dropped before the opening bell, tracking heavy selling in Asian chip names. A Federal Reserve decision and mega-cap earnings land within days.
Nasdaq 100 futures fell 0.73% early Tuesday as a semiconductor unwind that began in Asia pushed into US tech stocks. S&P 500 futures dipped 0.1%, while Dow futures rose 86 points, or 0.16%.
Wall Street came into the session off a choppy Monday. The Nasdaq Composite ended the day down 0.2% as an unwind in semiconductor stocks weighed on the tech-heavy index. That selling spilled into Asian markets overnight, where South Korea’s Kospi was temporarily halted after slumping 10.84%.
Chip names lead the premarket drop
Micron Technology fell 4.5% in premarket trading, with Marvell and Advanced Micro Devices each shedding 3%. Nvidia was down around 1.2%, while Intel and AMD traded more than 3% lower.
Futures on the Nasdaq 100 fell further than the broader index, with the S&P 500 hovering just below the flatline. The moves followed heavy selling in Asia, where SK Hynix plunged 14.65% at the close and Samsung Electronics fell more than 13%.
Nvidia had already dropped 5% on Monday, giving Apple back its top spot as the world’s biggest listed company.
Morningstar points to China’s chipmaking progress
The selling followed a report by the Information that China has begun mass production of homegrown deep ultraviolet chipmaking tools. Morningstar equity analyst Jing Jie Yu said the market was likely spooked by the progress of China’s chipmaking equipment capabilities, and was worried the progress would threaten the competitive position of global chipmaking and chip equipment leaders.
According to the Guardian, Yu called the move overdone: “we believe the sell-off today is largely a knee-jerk reaction and overdone”.
Investors are also growing increasingly fearful of the huge amount of borrowing among AI companies. Prices for credit default swaps tied to the likes of Oracle, Alphabet and Nvidia have risen to record highs in recent days, according to a report by the FT.
Earnings and the Fed test the AI trade
Amazon, Meta Platforms and Microsoft report results this week, and Apple also reports. The chip trade hinges on continued spending from the hyperscalers, even as the mega-caps themselves falter.
A Federal Reserve rate decision is due Wednesday, and investors expect the central bank to remain on hold while seeking greater clarity on the path forward for monetary policy. Fed funds futures were last pricing in a quarter point hike in September, according to the CME FedWatch Tool.
Sources: CNBC, The Guardian
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