Chip stocks led a sharp pullback in US markets on Monday as a fresh report about Chinese competition in semiconductor manufacturing rattled investors heading into the busiest week of the quarter.
Oh shit
The information: China Starts Mass-Producing Homegrown DUV Chipmaking Tools, An Advance for Local Chip Industry A Chinese state-backed company has begun manufacturing one of the key pieces of equipment used in chip manufacturing for the first time, a key development in… pic.twitter.com/YTALg1hHfh
— Jukan (@jukan05) July 27, 2026
The Nasdaq Composite fell 0.5% and the S&P 500 slipped around 0.1% after both indexes started the day higher. The Dow Jones Industrial Average held on to gains, rising about 0.5%.
The PHLX Semiconductor Index dropped 4.3% after opening in positive territory. The reversal came quickly once chip stocks began selling off in early trading.
The catalyst was a report from Bloomberg and The Information that a Chinese state-backed company has started mass-producing a key piece of chipmaking equipment. That directly threatens companies like ASML, which dominates that market in the West.
Nvidia and ASML both fell more than 4% on the news. AMD and Micron also dropped, pulling the semiconductor index and the broader Nasdaq lower.
The report renewed concerns that China could close the gap with the US in artificial intelligence infrastructure. Chipmaking equipment is a chokepoint in that race, and news that China may be producing it domestically hit semiconductor stocks hard.
The US has imposed export restrictions on advanced chips and chipmaking tools to China. Monday’s report suggests those restrictions may be less effective than markets had assumed.
Oil prices fell over 5% on Monday after the US and Iran paused their fighting. Brent crude futures traded near $91 a barrel. The ceasefire raised hopes that peace negotiations could restart after two weeks of attacks.
Lower oil prices could ease some inflation pressure, which matters for the Federal Reserve. The Fed meets Wednesday and is expected to hold rates steady, but a rate hike has not been ruled out. It is being called one of the least-telegraphed Fed decisions in years.
Earnings season moves into high gear this week with Microsoft, Meta Platforms, Apple, and Amazon all set to report. Investors will be watching closely for capital expenditure guidance and any signs of progress on AI monetization.
The focus on spending comes after Alphabet and Tesla’s capital expenditure plans caused a sell-off in tech stocks last week. Markets are still digesting what big AI spending means for near-term profits.
The divergence between the Dow and the tech-heavy Nasdaq on Monday showed how chip stocks can move the broader market on their own. The semiconductor sector carries heavy weight in the major indexes.
As of midday Monday, the Nasdaq was at 24,924, the S&P 500 was flat near 7,412, and the Dow was up around 222 points.
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