Semiconductor ETF slides 3% as TSMC capex hike fuels rotation

The semiconductor ETF slid nearly 3% at the open, leading a tech selloff after Taiwan Semiconductor Manufacturing Co. raised its 2026 capital expenditure outlook to as much as $64 billion.

The VanEck Semiconductor ETF dropped 2.2%, with TSMC shares falling 4.6% after the chipmaker posted a record second quarter but boosted its full-year capex range to $60 billion to $64 billion from $52 billion to $56 billion. Revenue rose 33.7% to $40.2 billion and net profit jumped 77.4% to about $22.4 billion, yet investors focused on the rising cost of the AI buildout. Arm Holdings declined 4%, Intel slid 2.8% and STMicroelectronics fell 4.6% as the spending reset rippled across the supply chain. In Seoul, SK Hynix tumbled 11%.

The rotation into defensive names accelerated as the consumer staples ETF rose 1.5%, while the global technology index ETF fell nearly 2%. The S&P 500 slipped 0.4% to 7,545, the Nasdaq Composite dropped 0.8% to 26,057, and the Dow Jones Industrial Average held near flat at 52,731, supported by a 6% surge in UnitedHealth Group after the health insurer topped earnings expectations. Abbott Laboratories also gained 12.5% on its results, while Erie Indemnity rose 7.5% and J.B. Hunt Transport Services added 7.1%.

On the downside, Coterra Energy fell 8.6%, Corning dropped 7.6% and Seagate Technology declined 7.5%, reflecting broad-based selling beyond semiconductors. The Russell 2000 edged up 0.3% to 2,990, suggesting small-cap stocks were relatively insulated from the tech-led pressure.

June retail sales rose 0.2% month over month, matching consensus estimates but slowing from May's revised 1% gain, showing consumer momentum is easing. The wholesale inflation reading unexpectedly declined, adding a favorable data point for the Federal Reserve's rate path. The Cboe Volatility Index edged higher as traders weighed whether the AI infrastructure buildout is getting ahead of itself. Dell Technologies remained under pressure after a 10% slide in the prior session on similar concerns, while Microsoft is reportedly sharpening its AI sales pitch against OpenAI and Google, training teams to sell Azure as the full-stack enterprise AI platform.

The divergence between tech and defensive sectors shows a market grappling with competing narratives: favorable inflation data supports rate-cut expectations, but rising capex commitments from chipmakers raise questions about returns on AI investment. With earnings season accelerating, investors will watch for guidance from other semiconductor and tech names to gauge whether the spending cycle is sustainable.

This article is for informational purposes only and does not constitute investment advice.