Market quietly rotates out of AI chips as H2 begins

If you’ve been riding the AI chip wave, today probably felt rough. If you’re more broadly diversified, it felt more like a normal, slightly down day where the scoreboard hides how much is changing underneath.

The big story: rotation day, not crash day

Headlines say: S&P 500 slipped a bit, Nasdaq fell more, Dow was slightly up. But under the surface, more stocks rose than fell, and an “equal-weight” version of the market was up about 1.2%. That’s a sign money is spreading out instead of piling into the same few giants.

The sharp pain was in the hottest trades:

• Tech overall dropped about 2.6%.
• High-flying, jumpy stocks fell hard; a popular “momentum” basket was down over 4%.
• AI chip names got hit: Micron and SanDisk each sank around 10%, AMD and Intel were down high single digits.

At the same time, steadier areas caught a bid:

• Financials jumped more than 2%.
• Value-style stocks (cheaper, more established companies) rose about 0.6%.
• Low-volatility stocks (the “less jumpy” kind) were up nearly 0.5%.

Communication services was the star, helped by a huge pop in Meta (up almost 9%), which offset some of the tech weakness.

Why it happened: cooling, not collapsing

Fresh data painted a “slowing but still OK” picture:

• ADP said private employers added 98,000 jobs in June, fewer than expected but still positive, with layoffs dropping sharply.
• Manufacturing is still growing (ISM at 53.3, above 50), just a bit softer than forecasts.
• The Atlanta Fed cut its real-time GDP estimate from 2.5% to 1.2%, hinting at slower growth.