Nasdaq-100 futures fell on Thursday as chip and AI-linked stocks extended a sell-off, while Dow futures rose. Investors are rotating out of tech, and CNBC reports the shift is a risk at the index level because tech carries so much weight.
Nasdaq-100 futures dropped 1% on Thursday as neocloud stocks CoreWeave and Nebius fell. The Financial Times reported that the index fell 3% shortly after the opening bell.
Midterm results weigh on AI-linked stocks
The selling intensified over concerns that Democrats will slow the construction of new AI data centres, the FT said. Chip and memory companies were hardest hit, with Sandisk, Western Digital and Qualcomm all down more than 10%.
Qualcomm shares dropped 12% after the chipmaker issued weaker-than-expected guidance. Goldman Sachs traders also signaled that the Democratic sweep could keep pressure on tech. According to CNBC, they said "building will become more expensive, complicated and slower."
Rotation exposes the index to tech's weight
The iShares Semiconductor ETF (SOXX) has tumbled more than 23% over the past month on fears that AI-linked companies are borrowing too much for their capital investment plans. Meanwhile, the Dow Jones Industrial Average is up 4.1% over the same period, and Dow futures popped 300 points on Thursday after a 1,500-point rally on Wednesday.
Normally a rotation like this would be positive for the market. But the S&P 500 tech sector makes up 37% of the benchmark's total market capitalization, so the shift is detrimental at the index level.
The FT noted that the S&P 500's 1% drop since early October hides larger moves beneath the surface. The Philadelphia Semiconductor Index has fallen more than a fifth over that period, while consumer staples in the S&P 500 have climbed more than 10%.
BTIG's Jonathan Krinsky said the SOXX has closed below its 200-day moving average for four consecutive sessions. He added that broad market risk has not been eliminated.
Sources: CNBC, Financial Times
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