There was a sense of “how far will this selloff run” as tech shares in the US stumbled yesterday. Memory chipmakers bore the brunt of the selloff as both Micron and Sandisk fell by over 13%, after having surged in Monday trade before that.
The timing is uncanny with Micron set for its earnings call after the close today. And that is going to be the main event to watch on Wall Street. It will set the tone for the coming days and perhaps for the short-term as the AI trade is called into question.
Looking at the charts, you might not think that things are that bad. Even the S&P 500 and Nasdaq are only a little over 3% and near 6% away from record highs respectively, despite the recent commotion.
And after the selloff yesterday, there isn’t any follow through with S&P 500 futures up 0.1% and Nasdaq futures up 0.5% currently.
However, I would argue that the mood on the ground belies the potential vulnerability in tech shares at the moment.
There is a sense that investors are continuing to shift to the show me the money phase in demanding results after the massive spending on AI infrastructure. Adding to that, there is also a sense that we are nearing a demand plateau in the whole industry. And that won’t go down well amid the lofty expectations and continuous demand for perfection in every key earnings report.
As such, Micron is only the next name that will be put under the microscope. And the onus is on them to deliver above and beyond to keep the party going. Think of it as being the bellwether to indicate if the whole AI gold rush is still going strong, or if it’s starting to slow down.
The worry when it comes to the earnings call later is that ‘good’ might not be enough.
And if that happens, things could get really dicey in the coming days. For risk sentiment, this feels like the only game in town this week.
This article was written by Justin Low at investinglive.com.
