Nasdaq Drops 1.5% as Chip Selloff Drags Tech Lower
AMD plunges 17%, pulling Broadcom, Micron, and Applied Materials down 7-11%. Dow bucks the trend with 260-point gain as investors rotate into value.
The tech trade is breaking down, and semiconductors are leading the way.
The Nasdaq Composite fell 1.5% on Wednesday, closing at 22,905. The S&P 500 slipped 0.5% to 6,883. But the Dow gained 260 points to settle at 49,501—a divergence that tells you exactly where money is moving. Out of growth, into value. Out of chips, into everything else.
The catalyst was AMD's 17% collapse, its worst day since the pandemic. But the damage spread far beyond one stock. Broadcom fell 7%. Micron dropped 11%. Lam Research and Applied Materials both slid roughly 10%. The Philadelphia Semiconductor Index (SOX) had its worst session since last September.
AMD Set the Tone
AMD's Q4 numbers were fine—revenue beat by 6%, EPS beat by 16%. The problem was the forward look.
First-quarter guidance implied a sequential revenue decline, with China sales expected to plunge 75% to just $100 million as export restrictions tighten. Data center operating margins fell from 29% to 25% even as revenue grew. And CEO Lisa Su's commentary didn't offer the kind of bullish AI demand signals that investors wanted to hear.
The stock dropped 17.3% on Wednesday, erasing roughly $30 billion in market cap. That's not just a miss—it's a re-rating of AMD's position in the AI chip hierarchy, at least in the market's eyes.
Contagion Across the Chip Complex
AMD's selloff gave traders a reason to take profits across the entire semiconductor space. The logic: if AMD, the second-largest AI chip company, can't deliver a guidance raise despite record revenue, what does that say about the sustainability of AI spending?
The VIX surged nearly 17% on the day, its biggest jump in three weeks, as equity markets sold off broadly in the afternoon session. Tech led the declines, but industrials and materials also weakened.
| Stock | Wednesday Change |
|---|---|
| AMD | -17.3% |
| Micron | -11.0% |
| Lam Research | -10.2% |
| Applied Materials | -9.1% |
| Broadcom | -7.0% |
| NVIDIA | -3.8% |
NVIDIA held up better than its peers—down 3.8%—partly because its December quarter results had already set a high bar and partly because its Blackwell product cycle gives it a differentiated growth story. But even the most expensive chip stock in the world wasn't immune.
The Rotation Trade
While tech bled, the rest of the market held together. The Dow's 0.5% gain was driven by healthcare names—Amgen surged 8% and Eli Lilly climbed 7% on strong earnings. Financials were flat to slightly positive.
This is the rotation trade that strategists have been calling for since late 2025. After three consecutive years of S&P 500 returns above 20%—dominated by megacap tech—investors are finally distributing capital more broadly. The equal-weight S&P 500 has outperformed the cap-weighted index by 2 percentage points in February so far.
The question is whether this is a temporary profit-taking event or something more structural. The SaaS selloff that's been running for three weeks, combined with the chip unwind, suggests the market is genuinely repricing the risk premium on AI beneficiaries.
What's Ahead
Thursday brings more fuel for the fire. Alphabet's Q4 results hit after Wednesday's close—the company beat estimates but guided to $175-185 billion in 2026 capex, far above expectations. Shares fell 5% premarket. Amazon reports after Thursday's bell.
Friday's nonfarm payrolls report looms large after Wednesday's weak ADP print showed only 22,000 private jobs added. A soft BLS number could push the 10-year yield lower and give rate-sensitive sectors another bid—extending the rotation.
For traders, the playbook is getting clearer: fade the chip rallies, buy the healthcare dips, and watch the jobs data for the next macro catalyst. The S&P 500 is less than 2% off its record high, but the composition of returns is shifting fast.