We’re looking for culprits.

By Wolf Richter for WOLF STREET.

Let me just get this out up front: I don’t think the debacle in the stock market today had anything to do with the jobs report – Job Growth Turns Around Decidedly after Weakening for Years – but with semiconductors.

Semiconductor stocks were just overripe. And some are huge. Three are, or were, in the Trillion Dollar Club. They plunged yesterday, and they plunged further and deeper today, jobs or no jobs.

Maybe Broadcom did it. It tanked 20% in two days, $450 billion in value vanished from global portfolios. Maybe the giga-IPO of SpaceX with its $1.77 trillion valuation at 100 times revenues did it. Many have suspected that the IPO, followed by other mega-IPOs, would break the market – the mania in the stock market – as these IPOs become a gigantic liquidity suck.

Maybe the tech giants did it with their plans to also suck massive amounts of liquidity out of the stock market. They’ve started to announce plans to raise vast amounts of cash by selling new shares valued at their stratospheric valuations: On Monday, Alphabet announced that it would issue $80 billion in shares. Today, rumors spilled out that Meta is planning to sell “tens of billions” of shares. And Oracle already announced earlier this year that it would sell $20 billion in shares.

And other companies are likely to pile in, because this is one of the best times in history for a company to sell shares to the public and raise huge amounts of cash with the least shareholder dilution. Not selling shares at these prices would be a dereliction of their duties to their shareholders, so to speak. And then they can plow that cash into new projects, such as AI infrastructure, and thereby into the economy and generate growth and jobs, rather than let investors hoard it and gamble with it.

For the economy, this is a great thing. But these share sales – and the mega-IPOs along with it – reverse the liquidity flow with which share buybacks had pumped up the market for years.

Or maybe the weather did, which was unusually normal for this time of the year. Something did it, something always eventually undoes these historic spikes in semiconductor shares.

Or maybe it was just another dip for semiconductor stocks, before the spike resumes anew. Whatever. But the last two days were big.

Broadcom remains a suspect. It had an excellent quarter, doubling its AI-related revenues, and overall revenues jumped by 48%, according to its earnings release Wednesday evening. But it refused to increase guidance, and that was a bad sign, that was a sign that the magic is coming off.

Whereupon the stock [AVGO] tanked 12% on Thursday and nearly 8% today. Since its peak on Tuesday, over those three days, the stock has plunged by 20%.

Three days ago, Broadcom had a market valuation of $2.28 trillion. It has given up $450 billion of it since then.

But, but, but… the stock had spiked massively in the prior days and weeks, and that 20% plunge only took it back to where it had been in mid-April. So for people who’d gone on a long vacation from everything and just came back and looked at their portfolios, not much happened.

And Micron [MU] remains a suspect. It plunged 13.2% today after having plunged 7.7% yesterday. Over those two days, the shares plunged by 20%, giving up $240 billion in market cap and falling out of the Trillion Dollar Club.

But, but, but… the 20% plunge just unwound the results from the prior 8 trading days. That’s how crazy the spike has been.

We’ve been talking about Micron [MU] because it’s fantastical. Over the past 14 months through the peak on Wednesday, the share price had multiplied by 16 (+1500%) and its market capitalization had exploded from $72 billion to $1.21 trillion! Micron made history when it doubled its market cap from $500 billion to $1 trillion in just 48 trading days. No way in hell?

During the Dotcom Bust, Micron plunged by 98%, from Micron’s peak in July 2000 ($95.13) to December 2008 ($1.85). The first 70% of that plunge (to $29.00) happened in the first three months. Plunges of over 50% or 60% are the norm here.

It took the stock 24 years, to 2024, to exceed its historic Dotcom Bubble high. But then it moved with a vengeance, and the gains have been generational — and now a quarter of these generational gains vanished in two days.

Nvidia [NVDA] is always a suspect because it’s so huge. It’s the top dog in the Trillion Dollar Club. And when it drops even modestly, it takes a lot of value out of portfolios. It dropped 6.2% today and is down 13.0% from the high on May 14. $740 billion in market value evaporated from portfolios around the world. But that just rolled things back to where they’d been a month ago.

From just these three semiconductor makers in the Trillion Dollar Club combined, $1.43 trillion evaporated from portfolios over the past few days.

Semiconductor stocks can be scary instruments – they have proven to be over and over again. Especially when leveraged. Especially after a historic spike. Especially when it’s different this time.

The industry is incredibly cyclical, where chip “shortages” and sky-high chip prices fuel a massive capacity buildout by the chipmakers, and supply ramps up, just as demand stops blowing out, and soon it turns into a glut, where chip prices reverse and collapse. This happens over and over again. Prices of most of these semiconductors act like prices of commodities. Stock prices anticipate these movements well in advance.

The dip-buyers that jumped in to take the shares off the frazzled sellers’ hands weren’t strong enough to turn around the drop at the end of the day. The semiconductor stocks just kept on drifting lower into the close of the market today.

Maybe Monday, after everyone takes a breath, the dip-buying can push up those shares.

Overall, the Nasdaq Composite dropped by 4.2% today, but is down by only 5.4% from its all-time high three days ago. So really, not a lot has happened, overall in tech land, and it’s still one of the best times in history for tech companies to sell shares to the public to raise cash at huge valuations, with the least dilution of shareholders, and plow this cash into the economy.

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