Chip stocks on Wall Street suffered another day of selling on Wednesday, July 15, with shares of AMD, Micron, Intel, Sandisk, Western Digital, and SK Hynix's ADRs falling between 3.5% and 9%. This sell-off followed a strong rally in the previous session, leading investors to lock in profits. The Philadelphia Semiconductor Index, a key gauge for the sector, tumbled 2.31% to 12,369.17 points, marking a roughly 15.5% decline from its June 22 peak. Nvidia was a notable exception, ending above the flat line.
The decline in chip stocks occurred despite positive news, including ASML's strong earnings report, which highlighted robust demand for semiconductor equipment driven by artificial intelligence investments. However, the profit-taking outweighed these positive indicators and broad optimism around AI demand. Micron Technology, for instance, saw an 8.02% drop, while SK Hynix ADRs fell 9%.
Contrasting the chip sector's struggles, the broader market indices closed higher. The Dow Jones Industrial Average gained 0.34%, the S&P 500 rose 0.36%, and the Nasdaq Composite advanced 0.60%. This divergence was fueled by a better-than-expected inflation report, with the Producer Price Index falling 0.3% in June, its biggest monthly decline in 14 months. Additionally, strong earnings from major financial institutions like Morgan Stanley, which reported record quarterly revenue of $21.35 billion and a 69% increase in equity trading revenue, boosted market sentiment. BlackRock also surged 6.3% after exceeding earnings estimates.
Concerns over artificial intelligence infrastructure development causing short-term price increases were addressed by Federal Reserve Chairman Kevin Warsh. He acknowledged that AI investment has indeed raised some prices but views this as a one-time price adjustment accompanied by a 'supply-side response' that will stimulate increased capacity, differentiating it from geopolitical supply chain disruptions. This suggests AI-driven price bumps may not translate into long-term inflationary pressures. The market is now looking ahead to retail sales data and initial jobless claims, as well as upcoming earnings reports from major companies like Netflix and TSMC.
