US chip and memory stocks fall as investors pull back from AI plays

In short: US tech shares, especially chip and computer storage stocks, fell on Thursday as investors stepped back from some of this year’s biggest winners.

What's going on

Chipmakers and memory and storage companies took a hit as Wall Street turned shaky again. The Nasdaq Composite, a major index heavy on tech companies, fell 1.5%.

Several storage and memory firms dropped more than 9%, including Sandisk, Western Digital, and Seagate. Chipmakers Intel and Micron fell about 6%.

The Financial Times said this sell-off shows investors are rethinking how expensive some AI-related companies have become. Some traders are also cutting back on “leveraged” bets, which means investing with borrowed money (like buying a house with a mortgage, but for stocks). JPMorgan strategist Nikolaos Panigirtzoglou said this pullback from borrowed-money investing that started in June still appears to be going on.

There were mixed signals elsewhere. Taiwan Semiconductor Manufacturing Company reported a 77% jump in quarterly profit and said it plans to invest another $100bn to expand production in the US, but its US-listed shares still ended down 2.3%.

Big tech also slid as investors watched heavy spending on data centers, which are buildings full of computers that run AI systems. Google fell 4.4% and Amazon fell 1.2%.

What to watch

Investors are also watching oil prices and US interest rate policy. Tensions between the US and Iran have disrupted shipping through the Strait of Hormuz, a key route for global oil, and Brent crude ended at $84.23. Higher oil prices can push up everyday costs, which could keep pressure on the Federal Reserve to stay tough on inflation.

Source: Financial Times