Nasdaq Falls Over 1 Percent as Tech Stocks Slide on Profit Taking and Geopolitical Jitters

NEW YORK — The Nasdaq Composite declined 277.14 points, or 1.05 percent, to 26,004.46 on Monday amid renewed weakness in technology and semiconductor shares, as investors locked in gains from recent rallies and weighed ongoing uncertainties from the Middle East.

The drop extended early session losses, with the S&P 500 slipping modestly while the Dow Jones Industrial Average posted small gains, illustrating continued rotation away from high-growth names. Technology-heavy indexes bore the brunt of selling pressure following last week's strength tied to artificial intelligence enthusiasm and major listings.

Chip stocks were among the hardest hit. SK Hynix's American depositary receipts fell sharply after a strong Nasdaq debut on Friday, contributing to broader sector declines. Micron Technology, SanDisk and other memory and storage names also traded lower. The Philadelphia Semiconductor Index fell several percent as the group digested profit-taking after an extended run.

Analysts described the moves as a healthy correction rather than a reversal of the AI investment theme. Mohamed El-Erian, chief economic adviser at Allianz, said in a CNBC interview that markets are viewing recent U.S.-Iran tensions as likely contained. "The market is assuming that this clash will remain localized," he noted, pointing to indications that neither side seeks full escalation.

Oil prices rose on supply disruption fears linked to the Strait of Hormuz but pared gains later. West Texas Intermediate crude settled near recent levels, providing some support to energy names in the Dow while pressuring broader risk assets.

The session highlighted the market's sensitivity to rotations. After SK Hynix's landmark $26.5 billion U.S. listing helped boost sentiment, some investors shifted positions, leading to weakness in related names. SK Hynix remains a key player in high-bandwidth memory for AI applications, with strong long-term demand expected from hyperscalers and model developers.

Focus is rapidly shifting to corporate earnings season, which kicks off in earnest this week. Major banks including JPMorgan Chase, Goldman Sachs, Morgan Stanley, Bank of America, Citigroup and Wells Fargo report results, followed by technology and consumer names. FactSet projects S&P 500 companies will deliver average second-quarter earnings growth of more than 23 percent year-over-year.

Larry Adam, chief investment officer at Raymond James, maintained optimism about AI spending. He cited projections for capital expenditures to continue expanding through 2028, driven by demonstrated returns from AI adoption. "AI-related mentions in S&P 500 earnings calls hit a record high, up 98 percent from last year," he added.

The Nasdaq's performance this year remains robust overall, propelled by megacap technology companies. However, Monday's decline serves as a reminder of the sector's volatility even as underlying fundamentals in AI infrastructure appear solid.

Geopolitical developments added a layer of caution. Reports of Iranian actions and U.S. responses in the Gulf region contributed to energy price swings and selective risk-off flows. Markets have so far absorbed the news without broader disruption, focusing instead on company-specific catalysts.

Federal Reserve policy remains a background factor. Recent signals have kept rate expectations anchored, with potential for support if inflation continues moderating and growth holds steady.

For the semiconductor space, SK Hynix's listing and subsequent trading activity provide insight into investor appetite for AI supply chain exposure. The company's dominant market position and production ramp for advanced chips position it well for sustained growth, despite near-term fluctuations.

The Dow's relative strength reflected gains in financials, industrials and energy. Banks preparing for earnings offered a counterbalance to tech weakness. The divergence across indexes underscores healthy market breadth even during sector rotations.

Volume increased in technology shares as traders repositioned. Smaller growth names faced additional pressure compared to large-cap leaders.

Analysts caution that while enthusiasm for AI persists, periodic pullbacks are normal after sharp advances. Elevated valuations in parts of the sector invite selective selling, creating opportunities for patient investors.

SK Hynix's performance will continue to be monitored as its ADRs trade under the regular ticker. The premium to underlying shares may adjust as liquidity builds and arbitrage activity increases.

Broader indexes trade near recent highs, buoyed by corporate earnings resilience and expectations around policy. The S&P 500's modest loss kept it in positive territory for the year, with technology remaining the key driver despite Monday's setback.

As the week advances, reports from Netflix, Johnson & Johnson and others will offer further clues on consumer trends and corporate health. AI-related commentary in earnings calls is expected to draw particular attention.

Monday's trading exemplifies the market's ongoing balancing act between innovation-driven growth and caution around external risks and valuations. The Nasdaq's slide provides a pause after recent momentum, with focus turning to fundamentals in upcoming reports.

For participants, the session reinforces diversification benefits. Technology leads during expansions, but other sectors offer stability during adjustments. The Dow's gain amid Nasdaq weakness highlights this pattern.

The Federal Reserve's path and fiscal developments will influence the backdrop. Solid earnings could reinforce the rally, while surprises in AI investment or geopolitics might test nearby support.

SK Hynix and the chip sector serve as important sentiment gauges for AI. Their stabilization post-listing volatility could support broader technology recovery.

Markets closed mixed but within familiar ranges. The day sets up a data-intensive week with potential to clarify near-term direction for equities.