AI chip stocks suffered a sharp two-session decline of roughly 12% in the holiday-shortened week before Independence Day, with the PHLX Semiconductor Index dropping 6.3% and 5.4% on consecutive days. Micron, SanDisk, Applied Materials, and others each fell around 10%. The selloff was triggered by reports of SK Hynix slowing high-bandwidth memory expansion and a weak June jobs report showing only 57,000 nonfarm payrolls — about half the consensus estimate. Meanwhile, the Dow hit a record 52,900 and enterprise software stocks surged, with the iShares Expanded Tech-Software ETF up 35% from its April low. Investors are rotating from AI infrastructure plays to software companies like ServiceNow, Snowflake, and Palantir, seeking evidence that AI spending is generating real revenue. The broader market valuation remains elevated, with the Shiller CAPE ratio at 38–40, near dot-com peak levels. Q2 earnings from AI software companies will be the key test of whether the rotation is justified.
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