The semiconductor selloff was the dominant driver of the Nasdaq’s weakness overnight, with the Nasdaq 100 trimming early losses but still closing down 1%. The retreat was broad-based across the chip sector, with a leading semiconductor ETF sliding 3.6% as investors continued to rotate away from AI-linked names, into more economically exposed sectors i.e. a broadening of the rally which we’ve been looking for.
The weakness was fuelled by fresh concerns over China’s rapidly advancing chipmaking capabilities, adding to existing fears around the sustainability of AI spending and the circular funding dynamics within the AI ecosystem. The selling spread across global markets, with South Korea’s Kospi tumbling nearly 11%, triggering circuit breakers, while a Bloomberg index of Asian semiconductor stocks slumped 7.5% in its steepest one-day decline since April 2025. Within the Mag Seven, however, performance was mixed, with gains in Microsoft (+1.1%) and Apple Inc (+0.9%) helping to offset some of the pressure from semiconductor stocks.
From a technical perspective, we need to see a close back above 28,300 to trigger a short-term buy signal for the Nasdaq.
- We can see the uncertainty around chipmakers causing further underperformance by the NASDAQ in the coming months, but we ultimately see the index higher by Christmas.
MM is bullish towards the NASDAQ 100 in the 27,500 area
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