Published July 17, 2026
At the beginning of this year, as the lines on the chart below show, there was a substantial rotation OUT of tech stocks and into energy, financial, and other non-tech sectors. In April and May, tech stocks staged a massive rebound. Now, semiconductors appear to be rolling over while money flows back into the non-tech sectors (far right on the chart).
The semiconductor sector rolling over and heading lower is shown here.
The semiconductor business is absolutely booming. No question about that. As a result, semiconductor stocks have been on fire. Giving back some of those gains is expected.
Note that software (red line below) still has not recovered from its downswing. While the Mag 7 companies (green dotted line below) have been trading relatively flat. So, this Nasdaq story has been about semiconductors in recent months. But the volatility in the sector has become significant in recent weeks.
As a result, investors are now choosing to focus on the other areas of the market. Banks announced spectacular earnings this week. Real estate and industrials continue to do well. As have defensive sectors like healthcare. Thus, the recent outperformance of the high dividend ETF shown in the first chart.
Market Update
Investors were confronted this week with a re-escalation in the War with Iran. The announcement of a new blockade of the Strait of Hormuz sent growth-oriented shares lower Monday and pushed oil prices sharply upward all week. The Nasdaq closed down -1.6% Monday. The index recovered +0.9% Tuesday though tech investors faced a new dilemma as IBM pre-announced a significant miss in revenue and earnings. The company said that customers were prioritizing purchases of scarce memory chips, storage and servers over the consulting and other AI services provided by IBM. This news sent IBM shares down more than -20% Tuesday. Elsewhere, investors received favorable inflation news and saw blowout earnings from the big banks, both positives. Another green day Wednesday with shares of Apple surging +4% on reports the company is considering buying an AI chip developer. Memory chip makers led semiconductor stocks lower Thursday. Adding to the downside in tech, a fall in Alphabet’s stock price on news their next version of AI engine Gemini is behind schedule. The Nasdaq suffered a -1.5% tumble despite bell-weather chip manufacturer, TSMC, posting upbeat earnings. Another -1.4% came off the Nasdaq Friday as the selloff in semiconductor shares continued. The sector has lost almost -15% over the past month as investors have become concerned about increased spending to ramp capacity. A further negative Friday was the release of earnings from Netflix showing slower growth. The negative market tone Friday spread beyond tech with investors choosing not to buy a morning gap down.
Heightened Iran war tensions and a glass-half-empty view of semiconductor fortunes sent the Nasdaq 100 down -4.16% this week. It was the index’s first close below a key line of support since the rally began in April. The S&P 500 benefitted from powerhouse bank earnings to experience a lesser -1.54% weekly decline. Small cap stocks fell a modest -0.66% with strength in non-tech areas such as regional banks, energy, and real estate helping the index.
Warm wishes and until next week.