US equity markets faced a sharp selloff on Thursday as a surge in oil prices and rising Treasury yields intensified inflation concerns and fueled expectations of another Federal Reserve interest rate hike. High-beta technology and semiconductor stocks bore the brunt of the decline, with memory chip makers and AI bellwether Nvidia among the hardest hit.
Memory stocks plunge amid oil surge
Memory chip stocks fell significantly: Micron Technology dropped about 4%, SanDisk declined 4%, SK Hynix lost more than 5%, Seagate Technology fell 2.3%, and Western Digital was down approximately 3.7%. The Philadelphia Semiconductor Index declined 2.7%, while the S&P 500 and Dow Jones each fell 0.6% and the Nasdaq Composite slipped 0.7%. The selloff accelerated as West Texas Intermediate crude futures for October climbed above $100 a barrel and Brent crude for November surpassed $105, driven by escalating US-Iran tensions. The 10-year US Treasury yield rose above 4.9%, its highest level since November 2023, further pressuring growth-oriented stocks.
Inflation data and Fed expectations
The producer price index (PPI) rose 0.4% in August, matching forecasts, with an annual increase of 5.4%—well above the Fed's 2% target. The report did little to ease concerns ahead of the consumer price index (CPI) release and the Fed's September 16 rate decision. Fed funds futures priced in a 74% probability of a quarter-point rate hike, according to the CME FedWatch Tool. PVM analyst John Evans commented: "The recent run-up in prices lays bare the market’s approach: this conflict will last longer than anticipated... If oil supply and exports are diminished, the oil balance remains tight, and prices remain elevated." Stephen Coltman of 21Shares added that the PPI report was "inconclusive" but surging oil and yields were "raising the stakes for investors."
Nvidia slides amid DOJ scrutiny and AI expansion
Nvidia shares dropped more than 2%, extending a two-day losing streak, as the Justice Department examined whether the company's licensing-and-hiring deal with AI chip startup Groq was structured to avoid antitrust review. The deal, announced in December, gave Nvidia rights to Groq's technology and brought its CEO and COO to Nvidia while Groq remained independent. Lawmakers characterized the arrangement as a takeover that limited competition. The probe is part of broader regulatory scrutiny of AI industry consolidation involving Amazon, Microsoft, and Alphabet's Google. Despite the scrutiny, Nvidia continues expanding its AI footprint, announcing a new collaboration with Palantir Technologies on "sovereign AI" for critical supply chains using Nvidia's Nemotron models and Palantir's Foundry and AIP platforms.
Fundamental support remains despite selloff
Goldman Sachs noted early signs that investor interest in memory stocks is returning, with Micron and SanDisk breaking out of summer downtrends. Susquehanna analyst Mehdi Hosseini forecast DRAM prices to rise 50% sequentially this quarter and NAND prices to jump 60%, providing a strong earnings tailwind. Micron's fiscal Q4 earnings due September 30 are expected to show revenue of about $50.8 billion and non-GAAP EPS of $31.28, up 932% year-over-year. Demand for high-bandwidth memory (HBM) remains robust: "Demand for HBM is already more than double the current supply and still growing very fast," said D.A. Davidson's Gil Luria. Valuation metrics also remain below the broader tech sector, with Micron and SanDisk trading at around 21 and 20 times trailing earnings respectively, versus roughly 32 times for the sector.
