Chip Rout Deepens as Oil and Yields Tighten Financial Conditions

The 10-year Treasury yield briefly crossed 5% on Monday, a threshold markets had not seen since 2023. Semiconductor stocks buckled at the same time, turning a modest decline in the broader market into a sharp reset for the AI trade.

The Philadelphia Semiconductor Index fell roughly 5.9%, while Nvidia (NVDA) dropped 3.4%, Micron Technology (MU) lost more than 5%, and Advanced Micro Devices (AMD) and Broadcom (AVGO) each fell more than 4%, according to market data reported by Yahoo Finance and Reuters. Intel (INTC) declined about 5.6%.

The immediate spark was not a deterioration in chip demand. Investors instead reacted to warnings from prominent AI executives, including Anthropic chief Dario Amodei, OpenAI chief Sam Altman and Elon Musk, that the industry’s development pace may need to slow because of safety concerns. That message struck at the assumptions supporting an enormous buildout of data centers, accelerators and networking equipment.

Memory suppliers and semiconductor equipment makers took some of the hardest hits because their earnings are closely tied to the next leg of AI infrastructure spending. A pause would not erase demand, but it would challenge the premium valuations investors have assigned to companies expected to compound revenue for years.

Oil added a second layer of pressure. Brent crude rose to around $106 a barrel after trading near $110 earlier in the session, as Middle East supply concerns kept inflation expectations elevated. West Texas Intermediate traded near $101.

That matters for chip stocks through interest rates. Higher energy costs can feed into consumer and producer prices, making it harder for the Federal Reserve to ease policy. The two-year Treasury yield hovered near 4.64%, reflecting growing expectations for a rate increase at the Fed’s September 16 meeting, while the 10-year yield lifted the discount rate applied to distant corporate profits.

The S&P 500 fell only about 0.5% and the Nasdaq Composite lost 0.6%, suggesting the session was concentrated rather than a wholesale retreat from equities. Software and cybersecurity shares held up better as investors rotated away from hardware names most exposed to an AI capital-spending slowdown.

For chip investors, Monday’s selloff fused two risks that usually arrive separately: a more expensive macro backdrop and questions about whether the AI investment cycle can keep accelerating.