Dow Jones Hangs On While Memory Chips Take Another Beating

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The semiconductor sell-off that began Monday in Seoul extended into a fourth consecutive session on Thursday. The tech-heavy indexes lagged while the Dow nearly held flat. The Nasdaq Composite ( ^IXIC 0.97% ) dropped 0.9% as of 12:26 p.m. ET, dragged lower by another wave of chip losses. The S&P 500 ( ^GSPC 0.35% ) fell 0.3%. Meanwhile, the Dow Jones Industrial Average ( ^DJI 0.11% ) limited its decline to just 0.1%, thanks to healthcare stocks picking up the slack. The trouble started before the opening bell. Taiwan Semiconductor Manufacturing ( TSM 3.36% ) reported earnings that beat estimates, then promptly fell 4.6% after announcing it would spend between $60 billion and $64 billion in capital expenditures this year. That's up from a prior forecast of $52 billion to $56 billion. The company also committed another $100 billion to chipmaking facilities in Arizona. Investors didn't like the massive infrastructure spending. Taiwan Semi didn't directly move any of the top indexes, since it doesn't trade on the Nasdaq exchange and isn't headquartered in America. But the index-moving ripple effects hit hard.

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TSM raised its annual CAPEX forecast significantly from $56 billion to $64 billion, triggering market concerns. Consequently, the Nasdaq fell 0.9% amid a tech sell-off, while the Dow dipped only 0.1% supported by the healthcare sector. Investors are wary of the negative impact that excessive infrastructure spending by semiconductor firms may have on profitability.

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TSM's aggressive expansion strategy has signaled a potential shift in the capital expenditure cycle for the semiconductor industry. While increased investment reflects high demand for AI chips, the market is currently prioritizing margin protection over capacity growth, leading to widespread risk aversion in technology stocks.

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