A weak non-farm payroll report should have reassured markets—the Dow Jones indeed rose to a record high fueled by rising expectations of rate cuts. Yet, at the same time, reports that Anthropic is developing its own AI chip shattered the two-year-old assumption that “compute will always be scarce,” causing the Philadelphia Semiconductor Index to drop 12% over two days and the Nasdaq 100 to briefly fall more than 2%, forcing the S&P 500 to stay flat.
Market Performance
The S&P 500 closed flat at 7,483.24, up 1.76% for the week. The Dow Jones rose 1.14% to 52,900.07, setting a new all-time high since June 30, and gained 1.76% for the week. The Nasdaq declined 0.80% to 25,832.672, but still rose 1.97% for the week. The VIX closed at 16.15, down 2.65%. The U.S. Dollar Index initially plunged 0.87%, marking its largest single-day drop in two weeks, but recovered slightly to close up 0.13% at 100.980. The Russell 2000 stood at 2,995.0, virtually unchanged, edging down 0.03%.
This round of selling in chip stocks was triggered by Anthropic, which is reportedly launching its own AI chip project and negotiating with Samsung for manufacturing cooperation on 2-nanometer processes and advanced packaging. Nearly every player along the chip design and compute chain has been hit: Marvell fell 9.84%, Arm dropped 6.58%, Micron declined 5.49%, AMD slid 4.26%, Broadcom retreated 2.41%, and even relatively resilient NVIDIA lost 1.39%, while TSMC’s ADR shed 2.27%. Semiconductor equipment stocks fared even worse, with Teradyne plunging approximately 13.6% and KLA dropping around 11.5%. On the storage front, SanDisk tumbled over 14% in a single day, down 27% from its recent peak; “Big Short” Michael Burry took advantage of the downturn to increase his short position in Micron at $1,051.87.
Stocks are showing extreme divergence. Mark Zuckerberg admitted at Meta’s all-hands meeting that the development pace of AI agents over the past four months fell short of the company’s own expectations; upon the news, Meta’s stock dropped 4.9% that day. This came on top of prior market rumors that Meta planned to lease out its idle computing power, making the situation even worse. Tesla, by contrast, perfectly demonstrated the “buy the rumor, sell the fact” dynamic: it delivered 480,000 vehicles in Q2, a 25% year-over-year increase, surpassing analysts’ expectations of under 400,000 and marking its strongest Q2 ever—yet its stock still plunged 8.2% intraday, its largest single-day drop in nearly a year, signaling that markets now prioritize AI and autonomous driving over traditional metrics like delivery volumes.
In the bond market, the 10-year U.S. Treasury yield rose 0.40 basis points to 4.4832%, while the 2-year yield fell 3.73 basis points to 4.1371%. Commodities showed clear divergence: WTI crude oil closed up 0.16% at $68.69 per barrel, and Brent crude rose 0.32% to $71.80 per barrel; safe-haven demand pushed precious metals higher, with spot gold surging 2.30% to $4,123.21 per ounce and spot silver rising 3.04% to $60.9430 per ounce. Cryptocurrencies also rebounded, with Bitcoin gaining over 5% over two trading days, briefly surpassing $62,000 intraday—the strongest two-day performance since late February—and trading near $61,406 as of this writing; Ethereum rose 5.5% on the day, trading near $1,699.54. The European STOXX 600 index climbed 1.41% to 648.35, also setting a new all-time closing high.
Macro and Forward-Looking
The non-farm payroll report itself offered no surprises: new job growth was only half of expectations, and prior figures were significantly revised downward. The only unexpected element was the unemployment rate falling to its lowest level in a year, creating a “weak quantity, stable quality” combination. The market quickly responded—probabilities of a July rate hike dropped from one-third before the report to one-fifth, with most now betting on a December hike. The “New Fed Wire” assessed that the report failed to truly sway Fed officials still undecided; over the coming months, price data will have far greater influence on the rate path than employment data. The report’s real effect was to give Walsh a justification to remain on hold this summer.
Pressure from the White House has not eased. On Thursday, Trump stated that Walsh "must do what he must do," even if the Supreme Court rules that he currently lacks the authority to remove Fed Governor Cook—Walsh still intends to find another way to remove Cook from the board. Walsh responded firmly, asserting that the Fed’s independence will not change. However, at a European Central Bank forum, Walsh conceded that the recent decline in inflation expectations is an early sign that his tough stance is working, though he said nothing about whether to raise rates in July. Inside the Fed, opinions are divided: nine of the 18 officials support raising rates this year, while eight prefer to wait. ECB President Lagarde also stated on Thursday that the June rate hike was appropriate, as supply shocks continue to spread to other parts of the economy.
This round of selling in chip stocks has also affected Asia-Pacific markets; South Korean semiconductor heavyweights like Samsung Electronics and SK Hynix have retreated 20% to 30% from their June highs, closely mirroring the overnight decline in U.S. stocks. However, during the same period, South Korea’s semiconductor exports surged 71% in June, marking the first time monthly exports exceeded $100 billion. This clear divergence between export data and stock prices suggests the current decline is driven more by sentiment and valuation concerns than by a real loss in end-demand.
Tonight, monitor the June services and composite PMIs for the US, China, Europe, the UK, and Japan.
Tide View
The news about Anthropic developing its own chips and Meta planning to sell excess computing power may seem like two separate developments, but they both point to the same reality: AI companies are beginning to focus on extracting higher returns from their existing computing investments rather than blindly expanding capacity. This is more significant than any single negative headline—it undermines the "scarcity" narrative that has supported chip sector valuations over the past two years. Storage and equipment stocks have been hit hardest because this logic directly impacts their fundamentals.
However, the fact that the Dow Jones still reached a new high indicates that money hasn’t truly left the market—it has simply shifted from the overly crowded AI hardware sector to areas like finance, consumer goods, and precious metals. Whether this round of selling in chip stocks represents a true turning point won’t be answered by just one or two news items; it will depend on the upcoming earnings season and whether capital expenditures can truly translate into revenue.
Article by: Tide Research