The semiconductor sector suffered its worst single-day rout in over three years on Thursday as a disastrous after-hours guidance miss from Broadcom Inc. snowballed into a full-blown sector-wide bloodbath, dragging the broader Nasdaq composite down 4% in what the Wall Street Journal dubbed a “chip-led Nasdaq bloodbath.”
The iShares PHLX Semiconductor Sector Index ETF (SOXX) cratered 10.4%, erasing nearly $400 billion in combined market capitalization across the sector. The collapse was triggered by Broadcom’s fiscal third-quarter revenue forecast, which came in roughly $2 billion below consensus estimates — a rare misstep for the AI networking giant that had been one of the market’s most reliable growth stories.
“This is a wake-up call for anyone who thought the AI trade was bulletproof,” said Hans Mosesmann, an analyst at Rosenblatt Securities. “Broadcom is the backbone of AI data center networking. If they’re seeing a demand pullback, the whole ecosystem feels it.”
Broadcom shares fell 18% in after-hours trading before settling into a 16% decline at Thursday’s close, their steepest drop since the 2020 pandemic selloff. The company cited inventory digestion among hyperscale cloud customers and elongated procurement cycles for its custom ASIC designs as the primary drivers of the shortfall.
ARM Holdings was the hardest-hit name among the indexes, plunging 22% as investors fled the high-multiple AI proxy. The British chip designer, which has ridden a wave of AI enthusiasm since its 2023 IPO, saw its market cap sliced by over $30 billion in a single session. Traders pointed to a cascading unwind of crowded momentum positions as stop-losses triggered algorithmically across the sector.
Intel Corporation fared little better, dropping 15.5% to a new 52-week low. The beleaguered chipmaking giant, already struggling through a painful restructuring under CEO Pat Gelsinger, was caught in the crossfire despite having limited direct exposure to Broadcom’s specific end markets. The selloff highlighted the indiscriminate nature of the contagion.
“When the SOXX drops double digits, there’s nowhere to hide,” said Beth Kindig, lead tech analyst at I/O Fund. “Intel is still a hated stock, but today it got punished alongside everyone else purely on beta. The fundamentals barely mattered.”
NVIDIA, the largest holding in the SOXX at roughly 20% of the index, fell 8.2% — its worst day since the post-GTC correction earlier this year. Advanced Micro Devices dropped 11.3%, while Qualcomm and Micron each shed 9% and 12%, respectively. Even smaller names like Wolfspeed and ON Semiconductor, already trading near multiyear lows, saw additional double-digit percentage declines.
The SOXX’s 10.4% drop marks its largest one-day decline since September 2022, when the Federal Reserve’s aggressive rate hiking cycle pummeled growth stocks. But unlike that macro-driven selloff, today’s rout was purely sector-specific — a reminder that even the AI trade, which has carried the market for 18 consecutive months, is not immune to idiosyncratic shocks.
“The AI capex narrative isn’t broken, but it’s being stress-tested in real time,” Mosesmann added. “Broadcom’s miss doesn’t mean the AI boom is over. It means the easy money has been made, and the market is now demanding proof of execution.”
The broader Nasdaq Composite fell 4%, closing below the psychologically important 18,000 mark for the first time in three weeks. The S&P 500 shed 2.8%, while the Dow Jones Industrial Average proved relatively resilient, sliding just 1.2% as rotation out of technology into defensive sectors cushioned the blow.
Analysts will now watch closely for any ripple effects into next week’s earnings from Micron Technology and the upcoming NVIDIA GPU Technology Conference announcements. The consensus view is that Broadcom’s inventory correction is company-specific, but the velocity of today’s selloff suggests the market is pricing in a broader AI demand normalization.
“We may look back at June 5 as the day the AI trade matured,” Kindig said. “Not the day it died — the day it stopped being a free pass.”
