The Nasdaq (QQQ) suffered an over 4% drop last week. Energy stocks continued to climb. BP plc (BP) traded at highs. Oil prices also rose over the weekend, led by Brent crude prices topping $110/bbl. That might pressure AI suppliers again this week. Companies betting heavily on AI’s boom trade at a premium. Cautious investors are taking profits in case the macroeconomic headwinds worsen.
Now that Treasury bond yields are in the 5% range, markets are pricing in the higher cost of lending for neocloud and hyperscaler firms. The AI bellwether names fell in the double-digit percentages in the last week.
Micron Technology (MU), which is not susceptible to the boom/bust chip cycle, fell by 14.6%. Advanced Micro Devices (AMD), Intel (INTC), and Marvell (MRVL) also dropped.
Fearful investors did not hesitate to sell Broadcom (AVGO), despite its lower valuation. Taiwan Semiconductor (TSM), which flourishes from semiconductor chip production, lost nearly 9%. It trades at levels not seen since late July.
Speculators should look back at July as a turning point for the chip sector. South Korea’s KOSPI led a violent selloff. The selling triggered circuit breakers on July 29. The trigger, halting trade temporarily, happened again last week.
Brace for volatility to continue this week. Stocks might roar higher on relief rallies but then fall on profit-taking intraday.
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