Chip stocks plunge, but bargain-hunters stem losses in other tech names (updated)

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Chip stocks slide as AI trade loses steam; bargain hunters jump on other names
Unwinding tech inflows, rate concerns and AI spending doubts drive selling
Nasdaq slips 1.7%, erasing about $776 billion in market value
Semiconductor index down 7.5%, Micron off 10.8%
Updates prices throughout, adds graphics
By Shashwat Chauhan

    June 23 (Reuters) - U.S. chip stocks fell from record highs on Tuesday, but the broader market's initial slump brought out bargain-hunting investors, stemming the falloff in other companies central to the AI infrastructure rally that have powered the market over the last few years.
The tech-heavy Nasdaq Composite index .IXIC was still down 1.7%, wiping out around $776 billion in market value on Tuesday. Elon Musk's SpaceX SPCX.O briefly traded below $2 trillion in market cap for the first time since its debut earlier this month before rebounding into positive territory.
Tech has endured its first major selloff in weeks over the last several days, with the Nasdaq off by nearly 5% from its peak close from early June. The world's most valuable company, Nvidia NVDA.O, saw its market cap slip below $5 trillion with a 3.4% decline. It and Tesla TSLA.O were among the biggest drags on the Nasdaq.
Chipmakers, which have been among the biggest winners of the AI trade this year, clocked heavy losses, with the Philadelphia SE Semiconductor Index .SOX down 7.5%. Micron MU.O, one of the biggest gainers in recent months, was down 10.8%. It will report earnings after the markets close on Wednesday.
"The trade has been highly concentrated and flow-driven, which makes it vulnerable to relatively small shifts in sentiment," said Ross Mayfield, investment strategy analyst at Baird.
"It doesn't appear to be closely tied to the fundamentals of the AI story, but rather to the heavy concentration and strong inflows into global tech over the past few months now starting to unwind."
Memory chipmakers — the best-performing stocks on the S&P 500 .SPX so far this year — lagged on Tuesday, with SanDisk SNDK.O falling 12.4% and Western Digital WDC.O losing 8.4%. Memory chipmakers in South Korea also recorded steep declines.
SpaceX shares were up 3.3% at $159.7 just after 11:57 a.m. ET (1557 GMT), after falling as low as $147.11, its first slip below its opening-day price of $150.
TECH GIANTS MIXED
Other tech heavyweights were mixed, with Alphabet GOOGL.O off 1.1%, Apple AAPL.O up 0.3%, and Microsoft MSFT.O up more than 1%. Software stocks like Workday WDAY.O and Salesforce CRM.N were also higher; those shares sold off heavily earlier this year on AI-linked fears.
Commonly dubbed hyperscalers, these firms have committed billions to ramp up their AI infrastructures, though clearer evidence that AI products can generate returns justifying the spending remains elusive.
Lauren Hyslop, investment manager at Mattioli Woods, said the selloff was due to a more challenging interest-rate backdrop and concerns about the scale of capital required to fund the next phase of AI investment. 
SpaceX's record-breaking IPO fueled a trading frenzy in its first week as a listed company, but shares have unraveled in the past few trading sessions, erasing more than $600 billion in market capitalization since last Wednesday. 
"I'd be cautious about seeing this as a second-chance buying opportunity. The drop looks dramatic in scale, but these swings aren't unusual for a stock with such a small public float," said Nic Puckrin, cross-asset analyst and founder of Coin Bureau.
The company's shares are still more than 10% above their IPO price of $135. SpaceX also announced a bond offering earlier this week. 
Big IPOs often face turbulence in their early days on the public market. A Reuters analysis of 50 IPOs with the highest valuations in the past five years showed investors would have been better off buying an S&P 500 index fund about three-quarters of the time than buying into a big IPO. 
Rate-sensitive technology stocks have also been hurt by expectations of tighter monetary policy under U.S. Federal Reserve Chair Kevin Warsh, especially as recent economic data points to a resilient economy.

 (Reporting by Shashwat Chauhan and Medha Singh in Bengaluru; Editing by Pooja Desai, Colin Barr, David Gaffen and Aurora Ellis)
 ((Shashwat.Chauhan@thomsonreuters.com;))