Nasdaq plunges as chip and AI shares suffer steep losses

U.S. equity benchmarks ended the session with diverging performances, but tech stocks saw the heaviest selling. The Nasdaq Composite dropped 2.60%, and the Nasdaq 100 retreated 2.90%. The S&P 500 also posted a steep decline. While the Dow and the Russell 2000 eked out modest advances, they provided little support.

Breadth on the exchange was unfavorable. On the Nasdaq, decliners numbered 1,734 compared with 1,471 advancers. Thus, while the biggest declines were in tech, the selling pressure spread beyond just a few large-cap names.

Market participants kept questioning if corporate earnings and forward outlooks could support the optimism around AI-related investment. Rising oil prices against the backdrop of Middle East tensions introduced an additional worry. Declining bond yields provided scant comfort for technology stocks during the trading day.

Closing figures for the major indexes:

• Dow Industrial Average gained 11.98 points, or 0.02%, to close at 52,873.28.

• S&P 500 declined 93.74 points, or 1.21%, to end at 7,663.43.

• Nasdaq Composite dropped 694.00 points, or 2.60%, to finish at 26,008.86.

• Russell 2000 advanced 3.01 points, or 0.11%, to 2,784.03.

• Nasdaq 100 fell 863.83 points, or 2.90%, to 28,958.69.

Chip and artificial intelligence stocks suffered the most severe losses.

The bounce seen the prior session offered little shield for today's purchasers. Equities in semiconductor equipment, chipmakers and AI infrastructure were especially hard hit, many falling far more than the broader Nasdaq averages.

• Lam Research dropped 11.75%, closing at $230.16.

• Lumentum fell 11.54% to $752.54.

• Astera Labs declined 11.17% to end at $257.65.

• Teradyne lost 10.63%, settling at $308.75.

• CoreWeave slid 10.06% to $55.60.

• KLA shed 9.55%, closing at $147.83.

• Marvell decreased 8.68% to $223.52.

• SanDisk dropped 8.51% to $1,260.93.

• Applied Materials retreated 8.16%, finishing at $375.58.

• AMD slipped 8.10% to $507.93.

• Intel fell 8.04%, ending at $85.49.

Lam Research's performance underscored the market's harshness. Despite achieving record quarterly sales and surpassing revenue expectations, the company's forward earnings guidance failed to satisfy investors. Market participants concentrated on the path ahead.

Among non-tech names, Moderna lost 17.57%, ending at $202.63, and SpaceX dropped 9.13% to $144.77.

S&P 500: Much work remains for buyers.

Based on the technical levels mentioned earlier, the S&P 500 ended the session under its 200-hour moving average around 7,714 and its 100-hour moving average near 7,754. These levels now serve as resistance. Moving above and holding above them would allow buyers to regain some influence.

To the downside, the rising 100-day moving average at about 7,603 falls within the trading range of 7,573 to 7,617. That continues to be the key support area. The session's close held above that level, but a lasting breach lower would heighten the bearish outlook.

Nasdaq Composite: Trading beneath its 100-day moving average

The Nasdaq Composite finished below its 100-day moving average of 26,265.87, as flagged earlier in the session. That shifts the responsibility to the buying side.

If the index can reclaim that moving average and hold above it, some near-term pressure would be relieved. Until such a move occurs, sellers maintain dominance, with the September low of 25,831.74 as the next support target. Beneath that, focus would shift to the 38.2% Fibonacci retracement at 25,036.33 and the rising 200-day moving average around 24,980.37.

What traders should take away

A modest advance in the Dow doesn't capture the complete market picture. Breadth gauges measure participation among stocks, and index performance is also influenced by component weightings.

The day's unfavorable breadth and steep declines in chip and AI stocks illustrated the importance of looking beyond the surface. For those looking to buy, a lower price is merely the beginning. Regaining a previously broken technical threshold—and holding it—is what starts to enhance the trading landscape.

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