Tech stocks fell for a second straight session as debates over artificial intelligence and policy risks pressured major indexes, with the Nasdaq Composite logging a two-day drop of 2.2%, its worst such stretch since Aug. 1. According to Reuters, semiconductors and information technology shares led declines on Wednesday.
AI anxiety, policy overhang and sector rotation
The Philadelphia semiconductor index slipped 1.4%, while the S&P 500’s information technology sector fell 1%. Market participants cited a technical pullback after a strong rebound since the April 2 “Liberation Day,” alongside fresh unease over AI’s trajectory. Several strategists pointed to concerns about government interference after the Trump administration examined potential equity stakes in chipmakers, including Intel, in exchange for CHIPS Act grants.
Commentary reflected a market weighing profit-taking against potential rotation. Susquehanna’s Christopher Murphy described the move as an “overstretched pause,” noting a notable sale of more than 20,000 December 100 puts as the SPX rebounded, which he said suggested investors were using the pullback rather than reallocating wholesale. B. Riley Wealth Management’s Art Hogan said technology’s 40% rise off April lows “got ahead of itself,” adding that 493 other S&P 500 names have lagged the “Mag 7,” opening room for rotation.
Traders eye Fed signals and AI narrative shifts
TastyLive’s Christopher Vecchio said tech weakness reflected reduced risk-taking ahead of the Federal Reserve’s Jackson Hole gathering and a speech by Chair Jerome Powell, alongside “fresh concerns over the durability of the AI boom” following an MIT study and remarks from OpenAI’s Sam Altman about excess buildout. Running Point’s Michael Ashley Schulman said stocks that “had been sprinting on AI dreams” pulled back, citing Nvidia, AMD, and Palantir, and referenced DeepSeek’s update on Tuesday as a market pressure point remembered from January.
Volatility, profit-taking and defensive tones emerge
Interactive Brokers’ Steve Sosnick observed dip buyers stepping in late morning, attributing early declines to profit-taking and risk-squaring before Powell’s remarks, and noting that megacap tech weightings magnified moves. He also linked some intensity to the president’s calls for Federal Reserve Governor Lisa Cook’s resignation, saying the timing raised concerns about politicization.
Other voices framed the slide as a healthy breather. Mindset Wealth Management’s Seth Hickle called tech “overbought” after strong earnings, expecting only a short-term trend before money returns to the sector. Ladenburg Thalmann’s Phil Blancato characterized the action as profit-taking and rebalancing that could reverse quickly if the Fed hints at cuts. Annex Wealth Management’s Brian Jacobsen said the shift from “rally to rout” showed vulnerability to negative headlines, while 50 Park Investments’ Adam Sarhan said worsening selling could spur rotation into areas like healthcare, small caps, or biotech.
