Article published at 9:30 a.m. CT
JJ Kinahan is Senior Vice president, Head of Retail Expansion and Alternative Investment Products at Cboe Global Markets, Inc. (Cboe).
Key Takeaways:
- Tech investors worry about future returns
- Oil prices heading back to intraweek highs
- Netflix is still struggling; shares fall
Chip stocks are again grabbing market headlines in early trading today as the worldwide sector decline advances. The catalysts are still the same: Investors are taking profits and ditching the sector as worries grow that the massive rally is financially sustainable, pushing the sector in bull market territory.
That’s dragging down the Nasdaq Composite more than 2%, placing it firmly on track for its third straight week of pullbacks. The S&P 500 Index is getting tagged too, falling 1.2%, and the 30-component Dow Jones Industrial Average is backtracking by 1.1%.
Oil prices are again heading higher as the hostilities between the U.S. and Iran are escalating and tightening global energy supplies. The U.S. struck key bridges and a tower overnight, and Iran retaliated as the two fight for control of the Strait of Hormuz. WTI Crude oil prices were heading back toward intraweek highs, upward by 3.8% to low $80s-per-barrel.
As we’ve noted before, this tech tailspin appears to have little to do with earnings – the vast majority have handily smashed Wall Street’s estimates and analysts are mostly bullish on what’s ahead. But the colossal capital expenditures requirements have investors wondering if and when those investments turn into profits.
Yesterday, for example, the selloff was initiated after Tawain Semiconductor’s solid earnings and revenue report was followed with guidance of an expected hike in capital expenditures to a range of $60 billion to $64 billion. Remember, that’s a range of billions of dollars from a prior guidance of $52 to $56 billion. Those are huge numbers. This is a scenario worth watching as artificial intelligence continues to creep into new facets of our lives and demand for chips grows.
Today, like most of this week, the tech stocks that were taking the biggest hits were Micron, Sandisk, Western Digital, as well as Seagate. Marvell gave back 8.7% yesterday – among the deepest declines — and was losing some 3.8% in early trading. Also tumbling are shares of Nvidia, Advanced Micro Devices, Broadcom and Intel, some falling in the 3% to 4% range.
For a better understanding of what investor thinking might be, consider how Trefis, the financial research and analyst firm, describes what’s ahead for Marvell: “The central risk for Marvell isn’t a hidden threat; it’s the scale of the promises it now has to keep. The company’s future is staked on delivering a multi-year acceleration in growth, and any stumble could be costly for a stock valued this richly.”
Alphabet shares took a beating too, dropping more than 4% after Bloomberg reported that its Google Gemini 3.5 Pro, a flagship AI model, is delayed again as it continues internal testing.
Yesterday, Wall Street’s expectation that Netflix shares would move at least 8% in either direction were close – shares tumbled 9% after the streaming service reported mixed results after the bell. Earnings were mostly in line but revenues fell slightly short of Wall Street’s expectations. The 13% year-over-year uptick in earnings was mostly tied to a rise in membership as well as higher subscription prices and higher ad revenue. T the stock was pulled down when Netflix’s narrowed its third-quarter guidance under the Street’s estimates, a second straight quarter of slowing growth. Shares were sinking some 11.6% in early trading.
It’s been a rough ride for shares of SpaceX. The rocket and spacecraft giant’s shares were dropping deeper than 6% in early trading after the firm scratched its expected launch of the Starship mega rocket Thursday when the engines wouldn’t ignite. Shares have been tripping below their $135 initial public offering much of this week, closing Thursday’s session at $131.11 and heading lower again today to the $123 a share range.
There is a bright spot in the markets today and it’s Travelers Insurance, which reported earnings that were 44% ahead of what they were a year ago. Much of that was tied to a 44% drop in catastrophe losses and the insurer’s vast investment portfolio. Shares were trending upward by 1.8% in the early going and have tracked 18.5% higher year-to-date.
Happy trading!
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