Dow Jumps 550 Points as Chip Stocks Fall for a Seventh Day

Wall Street split in two on Thursday, October 15. Chip stocks fell for a seventh straight session, while money moved into almost everything else. The Dow Jones Industrial Average rose about 550 points, or 1.1 percent, in late trade, lifted by gains in Nike, UnitedHealth and Salesforce, Investopedia reported. The S and P 500 rose 0.3 percent, and the Nasdaq Composite erased steep early losses to trade slightly higher in the final hour.

The Philadelphia Semiconductor Index, known as the SOX, sank 2.5 percent, CNN reported. Investor's Business Daily put the afternoon drop at 2.3 percent and said the index has fallen 13.6 percent since the close on October 6, its last up day. The chip index is down more than 20 percent from a peak in June, CNN said.

A flight away from AI stocks

Investors bought government bonds and shares outside the AI trade. Health care, materials and consumer staples rose, Barron's reported, and an equal weight version of the S and P 500, which counts every company the same regardless of size, gained about 1 percent. Software shares rallied, and traders bought some beaten down names late in the day.

The split showed in the index numbers. The Nasdaq 100, loaded with chip and AI shares, fell 2.01 percent to 29,954.68 late in the session, Yahoo Finance data showed, even as the broader Nasdaq Composite recovered. Gold rose about 2 percent to near 4,191 dollars an ounce. Bond prices rose too, and the 10 year Treasury yield slipped below 5.09 percent, Investopedia reported.

Why chips keep falling

Two days of hot inflation data sit behind the selloff. Producer prices rose 1.3 percent in September and 6.3 percent from a year earlier, well above forecasts, while retail sales rose 0.8 percent and weekly jobless claims came in at 199,000. Traders put a 27 percent chance on a Federal Reserve rate hike at its meeting in two weeks, according to CME FedWatch data cited by Investopedia. Higher rates make the heavy borrowing behind the AI data center buildout more expensive.

Even strong results did not help. TSMC posted record profit and raised its outlook, yet its shares finished 2 percent lower in Taiwan after its chief executive sounded cautious on component prices and the wider economy, CNN reported. In Asia, South Korea's Kospi fell 7.6 percent and hit a circuit breaker, with SK Hynix down 11 percent and Samsung Electronics down 9.5 percent. Japan's Nikkei 225 fell 4.9 percent. Investors also weighed slower revenue growth at Anthropic, which grew sales 45 percent to about 17 billion dollars last quarter after more than doubling the quarter before, CNN reported.

There were small signs of dip buying. CoreWeave, the debt heavy data center company at the center of the selloff, reversed early losses and rose about 3 percent after Nvidia chief Jensen Huang told Bloomberg he is optimistic about the company, CNN and Investopedia reported. Semtech fell 10.4 percent after disappointing guidance at its investor day, Investor's Business Daily reported.

What happens next

Chip earnings next week will test whether demand still supports the spending. Texas Instruments and Lam Research report on Wednesday, and MaxLinear reports late Thursday, Investor's Business Daily said. The Federal Reserve meeting in two weeks is the other test. If rates rise again, the borrowing that funds the AI buildout gets more expensive, and the rotation out of chip stocks could run longer.