Semiconductor and AI Stocks Tumble 6.3% as SOX Starts Q3 in Red; KLA Drops 12%

The Philadelphia Stock Exchange Semiconductor Index tumbled 6.3% at the start of Q3, with key holdings including KLA falling 12%, Lam Research declining 9.7%, and Applied Materials dropping 10%. AI memory stocks Sandisk and Micron Technology, among the best-performing issues in the S&P 500, both fell 10.6%. Other AI-related trades also weakened the broader market, with Corning down 13.6%, Caterpillar off roughly 7%, and data center builder Vertiv declining. The Nasdaq Composite fell 0.7% while the Nasdaq 100 dropped 1.5%; the S&P 500 was off 0.2%.

A report that Meta plans to launch a cloud computing business to sell excess data center capacity may have contributed to the selloff. The prospect of excess capacity could weigh on companies and investors betting on continued massive AI infrastructure spending.