The semiconductor industry just had the kind of day that makes portfolio managers reach for something stronger than coffee. US-listed chipmakers shed roughly $1.3 trillion in market value on June 5, dragging global equity markets down with them in a selloff that rippled from Wall Street to Tokyo to Frankfurt.

The PHLX Semiconductor Index, the benchmark tracker for chip stocks, cratered 10.3%. That’s the index’s largest single-day decline since March 2020, when the pandemic was busy rewriting everyone’s assumptions about how the world works.

What triggered the meltdown

Two forces collided to create the perfect storm. First, Broadcom issued forward guidance that landed well below market expectations, sending a chill through the entire chip sector. Second, US jobs data came in hotter than anticipated, which makes richly valued growth stocks look a lot less attractive as the Fed has less reason to cut interest rates.

The combination hit AI darlings especially hard. Nvidia, AMD, and Micron Technology all suffered steep declines.

The damage didn’t stay contained to US markets. Asian tech stocks took a beating as well, with South Korea’s SK Hynix, a major memory chip supplier and key player in the AI hardware supply chain, dropping nearly 10%. Tech-heavy indices across Asia and Europe gave back gains as the selloff cascaded across time zones.

The bigger picture behind the numbers

AI-related chip stocks had been trading at multiples that assumed years of explosive growth. Broadcom’s weak guidance was a reminder that the path from AI hype to AI revenue isn’t always a straight line upward.

By June 8, markets showed early signs of stabilization. The Nasdaq 100 bounced 1.6%, with chipmakers leading the recovery after leading the decline.

What this means for investors

The jobs data adds a layer of complexity. If the Fed maintains a hawkish stance because the labor market refuses to cool, the discount rate applied to future earnings goes up, hitting growth stocks hardest because so much of their value is based on profits years into the future.

For crypto-native investors, the connection is worth watching closely. Bitcoin and digital assets have shown increasing correlation with tech stocks, particularly during risk-off events.