US stock markets experienced a sharp selloff on June 5, with the Nasdaq Composite Index falling 4.18%, marking its largest single-day decline since early tariff-related volatility. The Philadelphia Semiconductor Index (SOX) plunged 10%, its steepest drop since March 2020, erasing over $1.2 trillion in market capitalization. The decline was triggered by multiple factors: Broadcom's earnings report showed custom AI chip demand fell short of market expectations, a SemiAnalysis report on June 4 claimed Nvidia's next-generation Vera Rubin NVL72 rack would reduce DRAM capacity from approximately 55TB to 28TB, and stronger-than-expected May non-farm payroll data heightened rate hike concerns. Investor anxiety over tech stock valuations and narrowing market breadth had been building, with analysts noting that only 43% of S&P 500 stocks rose in May compared to 64% in January.
Semiconductor Stocks Record Double-Digit Declines
Marvell Technology (MRVL) fell over 16%, Micron Technology (MU) dropped more than 13%, Intel (INTC), SanDisk (SNDK), and Western Digital (WDC) declined over 11%, Qualcomm (QCOM) and AMD (AMD) fell nearly 11%, Broadcom (AVGO) dropped nearly 8%, and Nvidia (NVDA) fell over 6%. Optical communications stocks also declined sharply, with Corning (GLW) down 10.18%, Coherent (COHR) down 10.64%, Lumentum (LITE) down 8.62%, and Ciena down 8.85%.
Dennis Dick, a proprietary trader at Triple D Trading, stated: "For a very long time, investors have been blindly buying the dip in chip stocks, and that strategy has worked. But today, that ended."
Broadcom Earnings Miss Sparks Two-Day 19% Drop
Broadcom's financial report showed demand for its custom artificial intelligence chips (ASIC) failed to meet high market expectations. Over two days, the company's stock fell a cumulative 19%.
SemiAnalysis Report Claims Nvidia Reduces DRAM Capacity
On June 4, research firm SemiAnalysis published an article stating that the SOCAMM DRAM capacity of Nvidia's next-generation flagship supercomputing rack Vera Rubin NVL72 may have been reduced from the previously expected approximately 55TB to approximately 28TB. The report noted that the memory change primarily stemmed from the CPU adopting LPDDR5X memory and only reduced initial memory capacity. On June 5, Nvidia CEO Jensen Huang denied the rumors in an interview.
May Jobs Data Exceeds Expectations, Rate Hike Fears Rise
Stronger-than-expected US May non-farm employment data increased rate hike expectations, causing panic among US stock market investors.
Analysts Cite Profit-Taking and Overvaluation Concerns
Mark Hackett, Chief Market Strategist at Nationwide, stated that investors had "already had their fingers hovering over the 'sell' button": "They don't necessarily have to clear out their positions entirely. But if you've been holding some semiconductor giants over the past two months, your position has actually deviated significantly from your long-term allocation targets. At some point, you have to lock in profits."
According to Dow Jones Market Data cited by The Wall Street Journal, approximately 43% of S&P 500 component stocks rose in May, down from 64% in January. Only 25% of stocks outperformed the benchmark index last month, compared to 59% at the start of the year. Many investors view the narrowing of leading stocks as a flashing warning signal, considering market breadth a measure of rally sustainability.
Kristina Hooper, Chief Market Strategist at Man Group, stated that while the S&P 500 index had risen over 11% year-to-date through May, the gain was only 2.4% after excluding AI-related stocks. Hooper noted that some AI-related stocks had doubled or even tripled in value during the year, adding: "I think the risks are not fully recognized. Many things could go wrong."
SpaceX IPO Scheduled June 12 at $1.77 Trillion Valuation
Space Exploration Technologies Corporation (SpaceX), owned by the world's richest person Elon Musk, will conduct a blockbuster initial public offering (IPO) on June 12, with a company valuation of $1.77 trillion.
Jason Pride, Chief Investment Strategist and Researcher at wealth management firm Glenmede, stated: "We are about to witness one of the largest IPOs in history... I think this is the focus of everyone's attention. One question is whether this signals a market bubble."
Hackett further noted: "Those planning to participate in the SpaceX IPO next week can't possibly sell their Procter & Gamble (P&G) stock to raise the money. They will definitely use funds previously allocated to AI, semiconductors, and momentum stocks, or at least general tech stock funds... And once the boulder starts rolling down the hill, you'll see quite disorderly selling."
Ohsung Kwon, Chief Equity Strategist at Wells Fargo, stated: "Today's market reaction is more driven by positioning factors rather than fundamental changes. The semiconductor sector was already in an extremely overbought state, so a pullback is not surprising. I don't think this means the semiconductor bull market is over."
FAQ
What caused the Nasdaq to fall 4.18% on June 5?
The Nasdaq Composite Index fell 4.18% on June 5 due to multiple factors: Broadcom's earnings report showed custom AI chip demand fell short of expectations, a SemiAnalysis report on June 4 claimed Nvidia would reduce DRAM capacity in its next-generation rack from approximately 55TB to 28TB, and stronger-than-expected May non-farm payroll data increased rate hike fears among investors.
How much did the Philadelphia Semiconductor Index drop on June 5?
The Philadelphia Semiconductor Index (SOX) fell 10% on June 5, marking its largest single-day decline since March 2020. The selloff erased over $1.2 trillion in market capitalization across the semiconductor sector.
When is the SpaceX IPO scheduled and what is its valuation?
Space Exploration Technologies Corporation (SpaceX) is scheduled to conduct its initial public offering (IPO) on June 12. The company is valued at $1.77 trillion, making it one of the largest IPOs in history.
