*(TLDR: momentum works both ways.)*
[**The Tech Selloff Is Turning Into a Rout**](https://trk.barrons.com/click/46621945.29842/aHR0cHM6Ly93d3cuYmFycm9ucy5jb20vYXJ0aWNsZXMvdGVjaC1zdG9jay1tYXJrZXQtc2VsbG9mZi10aGluZ3MtdG8ta25vdy10b2RheS1hNjAwODRiMz9tb2Q9ZGplbV9iX0ZlYXR1cmU/65dd956356d8fbcc5e005c15Gba12360a)
SPENCER PLATT/GETTY IMAGES
When it rains, it pours. The AI trade is getting hit by a deluge of bad news right now, and the forecast doesn’t look good.
Where to start? Chip stocks are close to bear market territory—the PHLX Semiconductor Index, SOX, is down 19% from its June peak.
Memory-boom darling Micron closed [below a $1 trillion](https://trk.barrons.com/click/46621945.29842/aHR0cHM6Ly93d3cuYmFycm9ucy5jb20vYXJ0aWNsZXMvbWljcm9uLXN0b2NrLXByaWNlLW1lbW9yeS1jaGlwcy05ZDFkMmUzNz9tb2Q9ZGplbV9iX0ZlYXR1cmU/65dd956356d8fbcc5e005c15C96e687ce) market cap for the first time in six weeks. The $407 billion market value it has lost since June 25 is larger than the combined value of Qualcomm and Marvell.
Oh, and SpaceX closed below its IPO price and then [aborted a Starship launch](https://trk.barrons.com/click/46621945.29842/aHR0cHM6Ly93d3cuYmFycm9ucy5jb20vYXJ0aWNsZXMvc3BhY2V4LXN0b2NrLXByaWNlLXN0YXJzaGlwLWI4OTFjOWM2P21vZD1kamVtX2JfRmVhdHVyZQ/65dd956356d8fbcc5e005c15C307e4b18), sending the shares even lower after-hours.
There’s more. The Magnificent Seven’s recent ride to the rescue has been derailed, too. Alphabet stock fell 4.4% on reports its flagship AI model Gemini 3.5 Pro is months behind schedule. Meta, Amazon, and Nvidia also had bad days.
Beijing-based AI start-up Moonshot released a new open model Friday, which it said closes the gap to Anthropic and OpenAI. The timing is awful—not now, China!
All of that points to the tech selloff becoming a rout. At least, the S&P 500 has [held up OK](https://trk.barrons.com/click/46621945.29842/aHR0cHM6Ly93d3cuYmFycm9ucy5jb20vYXJ0aWNsZXMvYWktc3RvY2stbWFya2V0LWE1ODkyOWIxP21vZD1kamVtX2JfRmVhdHVyZQ/65dd956356d8fbcc5e005c15C0e5dab15) this week.
Even the good news is being overlooked—Taiwanese chip maker TSMC reported a 77% jump in profits Thursday, but all the market cared about was its pledge to invest another $100 billion in the U.S.
Bumper AI spending was once celebrated but now seems to be feared. That will be an important factor when Alphabet kicks off Big Tech earnings next week.
One small mercy for tech investors is that the Korean market, a leading indicator for the U.S. recently, is closed for a holiday, sparing the KOSPI Index what would likely be huge losses. That’s until it reopens on Monday and plays catch up.
The problem with the momentum trade is that it works in both directions. The momentum lower is only gathering pace.