By Hannah Pedone and Britney Nguyen
Investors are cooling on momentum stocks and considering the implications of a strong jobs report
Micron shares lost 13% in Friday's trading action.
Major chip stocks sold off sharply on Friday to seal the sector's sharpest one-day loss in more than six years, as investors bailed on momentum-oriented plays.
The PHLX Semiconductor Index SOX closed down 10.3% on Friday afternoon - its largest one-day percent decline since March 16, 2020, according to Dow Jones Market Data.
Among notable losers, shares of Micron Technology (MU) sank 13.3%, Intel's stock (INTC) fell 11.3%, Advanced Micro Devices shares (AMD) dropped 10.9%, shares of Broadcom (AVGO) shed 7.9% and Nvidia shares (NVDA) slid 6.2%. Marvell's stock (MRVL) was off 16.7%.
&#34;The fact that many nontech sectors are holding up reasonably well suggests this is a semiconductor correction rather than a broad risk-off event,&#34; David Nicholas, founder of Nicholas Wealth Management, told MarketWatch in emailed comments.
For example, the healthcare, consumer staples, utilities and financial sectors gained ground Friday.
See more: Micron suffers record market-cap wipeout as Broadcom casts a shadow over chip stocks
But Bernstein analyst Stacy Rasgon urged investors to &#34;have a little perspective&#34; in light of the selloff. &#34;Nothing keeps going up every single day,&#34; he said.
The semiconductor trade has become crowded as it's &#34;the only thing that's working,&#34; he added. And despite Friday's decline, the SOX index is up more than 70% so far this year.
In evaluating Friday's moves, he said investors looking forward to high-profile initial public offerings like SpaceX's (SPCX) might be taking some profits in their winners, so they can use that money to buy SpaceX shares when they become available to purchase.
Brian Mulberry, chief market strategist at Zacks Investment Management, said the reasons behind Friday's chip selloff were twofold. For one, a better-than-expected jobs report on Friday is &#34;a key element for the Fed to perhaps increase rates,&#34; since the labor market looks durable enough to absorb a higher cost of capital to combat higher prices. A higher cost of capital would be a headwind to future earnings growth, Mulberry noted in emailed comments.
Broadcom's earnings report earlier this week has also weighed on the broader chip sector. Investors were disappointed that Broadcom declined to raise its forecast for more than $100 billion in AI-chip revenue next year.
Read on: Why Broadcom's stock is falling so hard after earnings
&#34;It confuses the market&#34; that growth expectations didn't get a lift despite AI-chip revenue jumping more than 143% from a year ago, Mulberry said.
Wedbush analyst Matt Bryson told MarketWatch that investors may increasingly be worried about shifting fundamentals in the memory market and the prospect of supply coming to outstrip demand. As it stands, memory and storage makers have been major beneficiaries of AI-driven supply shortages that have allowed them to raise prices.
&#34;There are two ways the supply-demand dynamic [could] get screwed up,&#34; Bryson said. &#34;Either you get demand destruction, or you have more supply.&#34;
Regarding the latter, Bryson noted that South Korean memory giant SK Hynix (KR:000660) is reportedly preparing to double its wafer production capacity for dynamic random-access memory by 2031, according to Bloomberg. Meanwhile, the company's South Korean memory peer Samsung Electronics (KR:005930) is planning to expand its investments and purchase orders for DRAM next year, according to a TrendForce report.
SK Hynix and Samsung did not immediately respond to a request for comment from MarketWatch.
While the reports could have impacted memory stocks on Friday, Bryson emphasized that those additions will likely not impact the market until at least 2029.
-Hannah Pedone -Britney Nguyen
This content was created by MarketWatch, which is operated by Dow Jones &amp; Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
06-05-26 1703ET

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The semiconductor sector suffered its worst one-day loss in over six years, with the PHLX Semiconductor Index dropping 10.3%. Major chip stocks plummeted, including Micron (-13.3%), Marvell (-16.7%), and Intel (-11.3%). Analysts attribute the selloff to a strong jobs report raising rate hike fears, Broadcom's disappointing AI revenue forecast, and concerns about future memory supply outstripping demand. Despite the drop, experts note the index remains up 70% year-to-date.

- Investors are retreating from momentum stocks following a significant selloff in major chip stocks, with the PHLX Semiconductor Index dropping 10.3%, marking its largest decline since March 2020.  
- The selloff was influenced by a strong jobs report, potentially signaling future Fed rate hikes, alongside disappointment over Broadcom's earnings forecast affecting the semiconductor sector.  
- Analysts suggest a correction in the semiconductor market rather than a broader risk-off event, as other sectors like healthcare and consumer staples showed resilience.

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Marvell, Micron shares tumble as the chip sector suffers its worst day in 6 years