Chip stocks drag Nasdaq lower despite solid US earnings, data
A sharp pullback in semiconductor stocks pushed the Nasdaq lower, highlighting how the sector's outsized market weight now dictates broader US index performance even as corporate earnings and economic data remain robust.
The Nasdaq closed lower on Thursday as a broad decline in semiconductor stocks overshadowed strong corporate earnings and solid macroeconomic indicators. Technology was among the worst-performing sectors in the S&P 500, driven primarily by a steep sell-off in memory-chip makers.
The downturn underscores a structural shift in US equity markets, where semiconductor valuations have grown large enough to single-handedly sway major indexes. "It comes strictly down to the weight of the chips in the S&P 500," said Paul Nolte, senior wealth advisor & market strategist at Murphy & Sylvest in Elmhurst, Illinois. "Three or four years ago, it was 8%, and now it's over 20%. If you look at the rest of the market, it's doing fine."
Even exceptionally strong financial results failed to satisfy investors who have bid up valuations. TSMC, a key barometer for global chip demand, reported a 77% surge in quarterly profit, yet its US-listed shares still lost ground. The muted reaction reflects the lofty expectations now baked into a sector that has already rallied nearly 70% this year. SanDisk, Western Digital, Seagate Technology, and Intel led the memory-chip segment lower.
Outside of technology, corporate earnings reactions were decidedly mixed. UnitedHealth Group advanced after beating Wall Street estimates and raising its 2026 guidance, helping to cushion losses in the Dow Jones Industrial Average. Conversely, GE Aerospace slid despite lifting its own 2026 profit forecast. United Airlines dropped sharply as surging oil prices pressured its forward guidance, highlighting the ongoing tension between corporate profits and input costs.
The underlying US economy showed notable resilience in the latest data releases. Figures published on Thursday revealed solid core retail sales, declining jobless claims, and surging manufacturing activity in the Northeast. However, the housing sector remained a clear weak point. Pending home sales dropped more than anticipated, while homebuilder sentiment soured due to high borrowing costs and strained affordability for prospective buyers.
Geopolitical risks added another layer of caution for market participants. The US and Iran extended a week-long barrage of airstrikes, an escalation that has all but voided a truce reached last month. Still, Iran's release of a US citizen suggested a diplomatic path remains open to avert a resumption of all-out war.
Investors are absorbing these crosscurrents as analysts have set a remarkably high bar for the second-quarter earnings season. S&P 500 companies are projected to post aggregate year-on-year earnings growth of 24.8%. Technology sector earnings alone are expected to jump 65.5% from the year-ago quarter, according to the latest data from LSEG.
