AI Tech Stocks Plunge as S&P Edges Down; Healthcare Surge Highlights Market Unease

AI Tech Stocks Plunge as S&P Edges Down; Healthcare Surge Highlights Market Unease​

The S&P 500 posted a marginally lower close, ending at 7,353.95 points, as volatility spread across key sectors. While some companies showcased remarkable resilience and growth potential, the steep decline in AI-related chipmakers underscored ongoing concerns over profitability within Wall Street’s tech giants.

The PHLX chip index tumbled 5.3%, suffering a significant 7.9% loss for the week—its worst performance since early April. This substantial drop comes amid questions regarding the timeline for massive spending on AI data centers to translate into sustained corporate profits.

Chip Sector Turbulence and Profitability Concerns​

AI-related tech stocks faced severe pressure, with the chip index shedding over 5% in a single day. Investors remain divided between those who anticipate continued high growth from artificial intelligence and those worried about the capital expenditure costs involved.

David Stubbs, chief investment strategist at AlphaCore Wealth Advisory, noted that while it is too early to confirm a major tech correction, questions regarding profitability and the massive capital expenditure (capex) story are still highly relevant. He warned that Wall Street may soon encounter signs that U.S. companies cannot meet high earnings expectations.

The market sentiment for AI stocks also took a dip after reports surfaced that OpenAI was potentially considering delaying its public debut until next year.

Healthcare Resilience and Corporate Cost Pressures​

In sharp contrast to the tech sell-off, Moderna experienced a massive rally, surging almost 13% to reach an all-time high since 2024. The surge followed an investor event hosted by the drug developer where its growth pipeline was showcased.

Apple’s stock rallied 3.1%, partly rebounding from previous trading days. The company justified recently announced price hikes for its iPad and MacBook lines, citing soaring memory and storage chip costs faced during production.

B. Riley Wealth chief market strategist Art Hogan noted that this inflation concern is comparable to a previous supply shock driven by semiconductor access. He pointed out that the current situation involves a renewed inflationary pressure generated by rising memory costs.

Macro Headwinds and Market Performance Metrics​

Eight of the 11 S&P 500 sector indexes declined, led by Industrials (.SPLRCI), which fell by 3.41%. Materials (.SPLRCM) also saw a significant loss of 2.45%.

Broader market volatility was underscored by inflation data showing U.S. prices rose above 4% in May, driven partly by energy costs linked to the Iran war. This kept alive speculation regarding a potential Federal Reserve rate hike.

Despite some declines, the day saw Advancing issues outnumber falling ones within the S&P 500, recorded at a 1.8-to-one ratio. For the week, the Nasdaq lost 4.7% and fell to 25,297.62 points.

Significant Market Movements​

The day saw considerable trading activity on U.S. exchanges, with 30.1 billion shares traded—a notable increase compared to the average of 23.1 billion over the previous 20 sessions.

In a volatile corporate transaction, ON Semiconductor dropped almost 24% after agreeing to acquire Synaptics in an all-stock deal valued at approximately $7 billion. Meanwhile, SpaceX’s shares saw a slight uptick of 0.15%.