At midday, the S&P 500 (^GSPC +0.51%) had edged up 0.17% to 7,566.72 as sector rotation offset chip weakness. The Nasdaq Composite (^IXIC +0.21%) slipped 0.39% to 26,749.70 on a semiconductor sell-off, and the Dow Jones Industrial Average (^DJI +1.55%) jumped 1.69% to 51,544.95 on value and energy tailwinds.
Market movers
Chip stocks were this morning’s flashpoint as Broadcom sank around 15% on a disappointing AI-chip outlook, dragging peers like Micron Technology and Advanced Micro Devices. Healthcare stocks gained, with Eli Lilly up over 5% and NovoCure up almost 12% at midday.
What this means for investors
Broadcom’s guidance miss sparked AI profit-taking and pressured semiconductor stocks this morning. Some are saying this could be the end of the sector’s incredible rally, with the State Street SPDR S&P Semiconductor ETF soaring by over 170% in the past year.
However, no rally can go on forever, and these pullbacks don’t necessarily reflect fundamental problems. That said, billionaire investor Ray Dalio just added his voice to AI bubble warnings. He said people confuse buying AI stocks with investing in the technology and warned that valuations may be becoming excessive.
Investing in a new and booming technology can have serious long-term growth potential, but — as with the dot.com era — a lot of companies may fail. It is important to research the best AI stocks and weigh massive infrastructure spending against revenue generation.
Emma Newbery has positions in NovoCure. The Motley Fool has positions in and recommends Advanced Micro Devices, Broadcom, Eli Lilly, Micron Technology, and NovoCure. The Motley Fool has a disclosure policy.
