Tech Rotation Is Becoming a Risk to the Broader Market

According to CNBC, the iShares Semiconductor ETF (SOXX) fell more than 23% over the past month as investors sold AI-linked stocks amid concerns about borrowing for capital investment. Intel and Cerebras Systems each dropped nearly 50%, while the Dow Jones Industrial Average rose 4.1% and the equal-weighted S&P 500 gained more than 5%. Technology accounts for 37% of the S&P 500’s market capitalization, making the shift away from the sector a drag on the broader index. Barclays strategist Venu Krishna said concerns about the sustainability of AI infrastructure investment had prompted a rotation into areas with less AI exposure. On Thursday, Dow futures rose 300 points, while Nasdaq-100 futures fell 1% as CoreWeave and Nebius declined. Qualcomm shares fell 12% after the chipmaker issued weaker-than-expected guidance. Goldman Sachs traders said the prospect of Democrats sweeping control of the House and Senate in this week’s midterm elections could add pressure to tech stocks, with legislative restrictions potentially making construction more expensive, complicated and slower. BTIG chief market technician Jonathan Krinsky noted that SOXX had closed below its 200-day moving average for four consecutive sessions and said broad-market risk remained despite tactical opportunities on both the long and short sides.