Small drop for good performance, a plunge for poor performance! U.S. tech stocks trapped in a "vicious cycle."

Small drop for good performance, a plunge for poor performance! U.S. tech stocks trapped in a "vicious cycle."

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U.S. tech stocks are caught in a dilemma that leaves investors with no easy options: impressive earnings fail to boost share prices, while disappointing results trigger steep drops. This asymmetric market reaction is shaking Wall Street’s confidence in the AI investment story and accelerating capital flight from high-valuation tech stocks.

On Thursday, TSMC announced a 77% year-over-year surge in quarterly net profit, setting a new record, and raised its 2026 revenue growth forecast to over 40%. Nonetheless, its U.S. shares still closed down 2.3%. Meanwhile, IBM plunged more than 20% in a single day on Tuesday after an earnings warning, a drop even bigger than 1987’s "Black Monday". Vital Knowledge analysts summarized the current predicament in one sentence:

"Tech stocks can’t seem to win either way—stellar results fail to spark gains, while misses are seriously punished."

Market analysts believe investors are worried about AI’s high valuations and massive spending returns. The earnings expectations bar is extremely high, leading to a serious disconnect between fundamentals and share prices. In addition, the market is undergoing systemic deleveraging and the breakdown of momentum trades, meaning that what drives prices is no longer fundamentals, but positioning structures.

The Nasdaq Composite fell 1.5% on Thursday, led by storage and chip stocks, with SanDisk, Western Digital, and Seagate all down more than 9%, and Intel and Micron each dropping about 6%. The U.S. semiconductor sector has dropped about 22% from its mid-June high, officially entering a technical bear market. The "Momentum Stocks" index tracked by Goldman Sachs tumbled 6% Thursday, and has shed one-fifth of its market cap so far this month.

Good Results Met With "Cold Shoulder," Market Logic Has Changed

The most concerning aspect of this tech stock correction is the severe disconnect between robust fundamentals and share price performance.

As noted in an article by Wallstreetcn, TSMC not only saw its Q2 net profit jump 77% year-over-year to a record NT$706.6 billion (about $22 billion), with a gross margin of 67.7%, but also raised its 2026 capex forecast to $60-64 billion. Earlier, ASML also reported a season of better-than-expected results and raised guidance. Micron’s latest quarterly data also far exceeded expectations, but its share price has retreated about 25% from its peak.

Market analysts believe all three companies’ results further strengthen the narrative of accelerating AI-driven demand and provide new data support for AI capital expenditure and computing power investment theses. However, semiconductor and memory stocks are still heading lower in the face of such positive catalysts, indicating that what currently dominates price trends may no longer be fundamentals, but positioning structures and factor dynamics—which also means earnings expectations for the hardware sector are now set extremely high.

It is also noteworthy that SpaceX, once considered a symbol of the AI boom, hasn’t been able to escape the downturn either.

SpaceX completed its IPO last month at a record $86 billion valuation with an issue price of $135, once soaring to a high of $225.64 and attracting a flood of retail investor funds. However, shares fell again Thursday by 3.1% to $131.11, now below the offering price.

This price action reflects growing investor skepticism about the high valuations of AI-related companies. According to the Financial Times, some investors are increasingly concerned about when large American tech companies’ huge data center spending will deliver substantial returns.

On Thursday, Google fell 4.4% and Amazon was down 1.2%. Bonds issued by "hyperscale cloud companies" have recently been pressured due to concerns about their massive borrowing and spending plans.

Amid multiple pressures, semiconductor sector trends have become the core indicator for the entire stock market.

Analysts believe, “The outlook for chip stocks remains the market’s most crucial question. They are showing clear cracks, so a strong and sustainable rebound is urgently needed; otherwise, it will be a true warning signal.”

Currently, the semiconductor index has fallen about 22% from its mid-June high, officially stepping into a technical bear market. With ASML, Micron, Samsung, and other companies’ better-than-expected results still being sold off, high-beta momentum strategies have once again taken a deep hit.

Implied market correlation remains near historical lows, distinct from the VIX, showing that the current volatility is more due to the repricing of structural factors, not systemic panic—though this does not mean risks have been cleared.

Deleveraging Wave Continues, Momentum Trades Rapidly Unravel

Behind this selloff is a systemic deleveraging process that began in June.

JPMorgan strategist Nikolaos Panigirtzoglou said, “The deleveraging phase that began in June appears to be ongoing. We think there’s still further deleveraging potential in leveraged equity ETFs, options, and margin accounts, which will continue to be a headwind for the stock market.”

Goldman Sachs data shows that the entire AI space is under pressure, with photonic interconnect, AI semiconductor, and data center segments all falling 5% to 12% in the past two days.

The momentum stock index tracked by Goldman has dropped about 20% this month, and according to their analysis, after volatility adjustment, the current factor pair’s volatility is at a five-year high, almost ten times the three-week realized volatility of the S&P 500.

Some analysts point out that AI-related stocks, "AI risk" stocks, hedge fund heavy positions versus shorted stocks, and high-beta 12-month winners versus losers have all seen "wrong direction" price moves, signaling noticeable disorder within the market’s internal structure.

Risk DisclaimerThe market carries risks; investments require caution. This article does not constitute personal investment advice and does not take into account individual users’ specific investment objectives, financial situations, or needs. Users should consider whether any opinions, views, or conclusions in this article fit their unique circumstances. Acting upon this content is at your own risk. ```