The S&P 500 closed at 7,534.62 on July 16, down 0.50% on the day. The Nasdaq Composite took a harder hit, falling 1.47% to 25,885.47. The Dow Jones Industrial Average, less exposed to chipmakers, slipped a more modest 0.21% to 52,549.51.

The culprit was a familiar one: semiconductors. The Philadelphia Semiconductor Index dropped 3.5%, dragged lower by memory-chip companies that have been riding a wave of AI-fueled optimism for the better part of two years.

The chip selloff in detail

Memory-chip stocks led the bleeding. SanDisk fell roughly 10%, Western Digital shed about 8%, and Seagate Technology declined approximately 7.5%.

The sector’s fundamental story remains strong. TSMC, the world’s most important chipmaker, reported quarterly profits that surged 77% year over year. Instead, TSMC’s US-listed shares fell about 2.1%.

Semiconductor stocks have quietly become the single most influential sector in the S&P 500. Their weighting in the index has climbed from around 8% several years ago to over 20% today.

Strong earnings couldn’t save the day

UnitedHealth Group advanced after upgrading its forecast, a sign that at least some corners of corporate America are feeling confident about the rest of the year.

Mixed economic signals add to the uncertainty

US retail sales rose only marginally in June. On the labor front, jobless claims actually decreased. Manufacturing activity in the Northeast surged, pointing to industrial resilience in a region that has struggled for decades. But pending home sales dropped more than expected, a reminder that higher interest rates continue to weigh on the housing market.

Neither Bitcoin nor the broader crypto market were directly implicated in the chip-driven selloff, which was fundamentally a story about sector-specific valuations rather than a macro risk-off event.