Chip stocks lead market decline
The selloff began in early trading after Goldman Sachs published a note suggesting that AI-related capital expenditure may be peaking. Nvidia lost $120 billion in market value, while AMD and Intel also posted losses of more than 3%. The Philadelphia Semiconductor Index fell 4.1%, its worst single-day drop since January. ASML, the Dutch chip equipment maker, fell 6% on reports that the U.S. is investigating whether its top lithography tool is operating in China.
Investors question AI spending returns
The market jitters reflect a broader reassessment of the economics behind the AI buildout. Major cloud providers have spent over $200 billion combined on AI data centers in the past 18 months. But returns on that investment remain unclear, with many enterprise AI products still in early adoption phases. Analysts at Morgan Stanley warned that a correction in AI infrastructure spending could ripple through the entire tech supply chain.
Defensive sectors gain as rotation accelerates
Utilities, healthcare, and consumer staples all posted gains as investors sought safety. The 10-year Treasury yield fell to 4.12% as bond prices rose. The selloff erased gains from earlier in June and left the S&P 500 roughly flat for the month. Market participants will watch Nvidia's next earnings report in August for signals on whether AI demand is truly slowing.