US Stocks Decline for Third Straight Session, Tech Sector Leads Losses

US stocks declined for the third consecutive session, with the Nasdaq dropping 1.33% and the S&P 500 losing about 0.69% in their largest daily decline since July 29, as investors flocked away from highly valued tech stocks.

The slump was led by the Philadelphia Semiconductor Index, which plunged 5%, with memory chip stocks and optical communications companies recording the highest losses, signaling concentrated pressure on segments most reliant on data center and artificial intelligence demand.

Several factors combined to drive this decline, most notably rising long-term US bond yields, which increase discount rates used to value growth tech stocks, alongside fears regarding the impact of geopolitical tensions on semiconductor supply chains.

This session indicates that the market is entering a rebalancing phase away from highly valued technology stocks; rising capital costs are narrowing the margin of safety for AI and chip stocks for the time being.

What do these terms mean?

Philadelphia Semiconductor Index (SOX): An index that tracks the performance of the top 30 companies in the semiconductor industry worldwide, serving as the main benchmark for the semiconductor sector in US markets.

Optical Communications: A technology for transmitting data via optical fibers at ultra-high speeds within massive data centers, which has experienced a major boom with the expansion of artificial intelligence.

Discount Rate: The percentage used to calculate the present value of a company's future earnings — the higher it rises (due to rising interest rates), the lower the estimated value of the stock, especially for tech growth stocks.