Semiconductor Index Suffers Biggest Drop in 6 Years and 7 Months Amid AI Sell-Off Shock

[Financial News] On the 5th (local time), a sell-off in AI-related stocks, including semiconductors, data centers and cloud companies, reached extreme levels on the U.S. stock market in New York.
The PHLX Semiconductor Sector (SOX), comprising 30 stocks of U.S.-listed companies involved in semiconductor design, manufacturing, equipment and distribution, closed at 9,011.14, down 12.2% from the previous session.
It was the biggest one-day drop since March 16, 2020, when the index fell 15.9%. It was the largest decline in about 6 years and 7 months.
It was the lowest closing level in about seven months, since April 10.
That amounts to a 38.4% drop from this year's high of 14,634.72, recorded on June 22, and a 21.8% plunge over the past five trading sessions.
By stock, Nvidia plunged 9.3% and Broadcom 10.4%, while AMD fell 17.3% and Micron 17.5%.
Qualcomm (-9.5%) was also weighed down by its outlook for this quarter's results falling short of market expectations. Memory-related stocks such as SanDisk Corporation (-22.3%) and Western Digital Corporation (-17.4%), as well as SK hynix ADR (-13.4%), also fell sharply.
Nvidia's market capitalization evaporated by about $447 billion (approximately 606 trillion won).
AI data center companies known as neoclouds also took a direct hit.
CoreWeave (-9.8%), Nebius (-14.9%) and IREN Limited (-16.9%) plunged, and CoreWeave's five-year credit default swap (CDS) spread widened to a record high, Reuters reported.
Reuters reported that concerns that the expansion of AI infrastructure could be delayed, after the Democrats' landslide victory in the midterm elections on the 3rd, triggered the sell-off.
Adding to the concerns was the possibility that smaller companies with limited access to financing amid high interest rates and tight financial conditions could be forced into disorderly liquidations.
The Magnificent Seven (M7), the companies with the largest market capitalizations, including Nvidia, also all fell.
Tesla plunged 10.8%, while Meta fell 4.0%, Microsoft 3.6%, Amazon and Alphabet Inc. 2.2% each, and Apple Inc. 1.5%.
Microsoft, Amazon, Apple, Alphabet and Meta had risen between 1.4% and 6.7% the previous day as investors digested the election results, but gave back some of those gains in a single day.
Meta President Dina Powell McCormick's remarks the previous day that building new data centers would “become more difficult” after the election affected the market.
Ted Parkhill, CEO of Incline Investment Management, said, “The market is moving from expectations about AI to the price of AI,” and added, “There is no doubt that AI will change the world over the long term, but that does not mean every AI-related stock is fairly valued right now.”

[email protected] Lee Seok-woo, International Affairs Correspondent Reporter