Wall Street Tumbles as Chip Rout Deepens, Sparking Rotation into Defensives

Wall Street ended lower on Thursday as a sharp selloff in semiconductor stocks dragged the Nasdaq and S&P 500 down despite strong retail sales data. The chip sector plunged 4.3%, led by memory-chip makers, while healthcare and consumer staples rallied on a defensive rotation. Netflix and Alphabet faced pressure from earnings disappointment and AI product delays, while ASML and UnitedHealth offered positive earnings surprises.

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Chip Bloodbath Sinks Nasdaq and S&P 500 as Defensives Rally The S&P 500 fell 0.5% and the Nasdaq dropped 1.5% as semiconductor stocks tumbled 4.3%, wiping out gains from strong economic data. Defensive sectors such as healthcare and consumer staples jumped over 2% as investors rotated out of high-growth technology names. 1 2 3 4 5 6

Netflix Shares Drop 8% After Lukewarm Revenue and Guidance Netflix reported second-quarter revenue of $12.56 billion, just shy of estimates, and announced it will reduce its engagement report frequency to once a year. Shares fell more than 8% in after-hours trading as investors looked past an EPS beat. 7 8

Alphabet Falls 4% as Flagship Gemini 3.5 Pro AI Model Delayed Alphabet shares sank following a report that its most powerful AI model, Gemini 3.5 Pro, is months behind schedule due to underperforming coding capabilities. The delay raises competitive concerns as OpenAI and Meta debut faster code-generation tools. 9

ASML Beats Q2 Estimates and Lifts 2026 Outlook on AI Boom Chip equipment giant ASML reported Q2 earnings of $8.81 per share on revenue of $10.84 billion, both beating analyst expectations. The company raised its full-year 2026 revenue forecast to €43-45 billion, citing robust AI-driven demand. 10

UnitedHealth and Abbott Rally on Strong Earnings Guidance Hikes UnitedHealth gained 1.2% after beating estimates and raising its 2026 forecast, while Abbott Laboratories also lifted its full-year EPS guidance following a strong second quarter. The positive healthcare results helped the Dow and defensive sectors outperform. 4 11

PayPal Board Rejects Takeover Offer From Stripe and Advent PayPal's board has determined that a joint acquisition bid from payments rival Stripe and private equity firm Advent International is inadequate, according to people familiar with the matter. The company is holding out for a higher price or a different structure. 12