A hard blow to technology on Wall Street: The chip index is diving by 23% since the beginning of the month
Concerns over massive investments in the AI field and the strengthening of competitors from China are exacerbating the falls on Wall Street. Conversely, finance and healthcare companies are showing new highs thanks to solid financial results.
A mixed closing was recorded overnight in the US markets, with a notable trend of capital reallocation felt throughout the trading day. Many traders chose to move investments from AI-related stocks toward cyclical sectors, which enjoyed a more positive atmosphere thanks to solid financial results and a decline in energy prices.
While the Dow Jones rose by 1.2%, led by strong reports from Coca-Cola and Boeing, the S&P 500 equal-weight index broke a new record. The standard index managed to maintain a slight increase of 0.2%, while the Nasdaq index experienced a retreat and approached a level considered a technical correction.
Significant fluctuations were recorded within sectoral ETFs. The XLK fund, which covers the technology sector, deteriorated to a low not seen since the beginning of May. In contrast, funds dealing with finance and healthcare reached new highs. Capital inflow was also recorded toward software companies, with the IGV fund rising by 1% — mainly thanks to a jump of about 6% in Nice and Monday shares.
On the other hand, the heaviest pressure was recorded in the chip sector, especially among memory component manufacturers such as Micron, SanDisk, and Nvidia. The SOXX index, which tracks companies in the field, completed a drop of more than 23% since the beginning of the month and is on track for its worst monthly performance since 2008. The sharp declines are attributed to concerns about circular financing surrounding giant deals in the AI field, alongside the strengthening of competitors from China and growing doubts regarding the viability of massive investments in this infrastructure.
In the individual stock segment, Apple briefly crossed a market capitalization of 5 trillion dollars, just a few months after passing the 4 trillion threshold. Coca-Cola and Royal Caribbean recorded nice gains following financial reports that were better than forecasts and the raising of future guidance.
Among Israeli companies, a mixed trend was recorded. Innoviz lost significant height following an announcement of a capital raise at a discount, and SolarEdge fell sharply as part of a broad negative trend in the entire green energy sector. Tower Semiconductor, Camtek, and Nova also suffered from the general declines in the chip sector.
In the debt market, US government bonds yielded gains for the third consecutive day, partly against the backdrop of falling oil prices and calm in the Middle East. Now, all eyes are on the Federal Reserve's interest rate decision and the publication of financial reports from Microsoft and Meta.
