Key facts
- Global stock markets experienced a significant sell-off on Tuesday, with the chip sector leading the declines.
- South Korea's stock market fell 10%, with SK Hynix and Samsung among the biggest losers.
- US semiconductor stocks such as Micron, AMD, and Intel saw declines of 6%.
- The Nasdaq 100 lost over $1 trillion in market value at one point.
- Market strategists offered mixed views, with some anticipating further downside and others calling the sell-off healthy.
- Commentators highlighted the cyclical nature of semiconductor stocks and the potential for a market rotation.
Global stock markets experienced a significant sell-off on Tuesday, with the chip sector bearing the brunt of the declines. South Korea's market plunged 10%, led by losses in SK Hynix and Samsung, while US chip stocks like Micron, AMD, and Intel shed 6%. The Nasdaq 100 saw its market value drop by over $1 trillion at one point.
Top market commentators offered varied perspectives on the downturn. Jim Paulsen, a Wall Street veteran, suggested further downside for the tech sector if the S&P 500 tech sector breaks through its previous technical low, which would represent another 3% drop. He noted the unprecedented nature of recent AI sector sell-offs compared to historical events like the dot-com bubble.
Craig Johnson, chief market technician at Piper Sandler, stated that the sector was due for a pullback after parabolic gains and emphasized the need for the market to hit a new high soon to sustain momentum. He reminded investors that semiconductor stocks are cyclical, not secular.
Andrew Slimmon, a senior portfolio manager at Morgan Stanley Investment Management, viewed the sell-off as healthy for the markets, given the crowded nature of the AI trade. He suggested it presented an opportunity for investors to add to tech and chip holdings, citing strong sector earnings.
Bret Kenwell, an analyst at eToro, described the situation as a "perfect storm" for a sell-off, anticipating that the weakness in tech could last several weeks due to market winner rotation and a hawkish-than-expected Federal Reserve stance that has been overlooked.