New York, May 7, 2026, 17:38 EDT
Chipmakers like Intel and AMD reversed earlier AI-fueled advances, dragging the S&P 500 down 0.38% to 7,337.11 by the close on Thursday. The Nasdaq slipped 0.13% to 25,806.20, while the Dow finished 0.63% lower at 49,596.97. Of the S&P 500’s 11 sectors, just two were left in positive territory.
This is a big deal—it knocked out the market’s core driver. Just a day before, upbeat guidance from AMD had propelled the S&P 500 and Nasdaq to fresh records, boosting chipmakers and other stocks tied to artificial intelligence. That run has been a key force behind the benchmark’s gains so far this year.
The numbers made clear just how unforgiving the semiconductor space can be. The PHLX Semiconductor Index slid 2.7%. Intel and Advanced Micro Devices both dropped roughly 3%. Still, Mike Dickson, who oversees portfolio management at Horizon Investments, pointed out the decline didn’t wipe out what he described as “a rip-roaring quarter of recovery.” Reuters
Shares of Arm traded lower in the U.S. after the UK-based chip designer flagged weaker demand in smartphones and signaled limits on how much of its new AI chip it can deliver. CEO Rene Haas told investors Arm can cover the first $1 billion in demand, though supply beyond that remains uncommitted.
Nvidia and Microsoft tacked on nearly 2%, showing investors aren’t dumping the big AI stocks just yet. Still, breadth narrowed: in the S&P 500, losers outpaced gainers by 1.8 to one. Materials and energy names bore the brunt of sector declines.
The economic setup left investors with little incentive to bet on swift Fed action. Jobless claims ticked up by 10,000 to 200,000 for the week ended May 2—still short of the 205,000 economists had penciled in, according to a Reuters survey. Even with the increase, ongoing claims dropped to their lowest since January 2024. “Steady as a rock,” FWDBONDS chief economist Christopher Rupkey said of the labor market. Reuters
Adding to the caution on rates, Cleveland Fed President Beth Hammack said she sees interest rates remaining “on hold for quite some time” while policymakers contend with inflation and ongoing uncertainty. Hammack also flagged a risk: an “inflationary mindset” could be settling in among both businesses and consumers after several years of price shocks. Reuters
Some tech names managed to shine despite the chip slump. Datadog shot higher as the cloud-monitoring firm raised its full-year revenue guidance to between $4.30 billion and $4.34 billion, up from its previous $4.06 billion to $4.10 billion range. CEO Olivier Pomel pointed to the company’s role in getting customers up and running with “AI-enabled solutions.” Datadog
After the bell, the U.S. Trade Court knocked down President Donald Trump’s newest 10% global tariffs, saying the sweeping duties weren’t supported by a 1970s trade statute. Too late to move the regular session, but investors tracking trade, rates, and Middle East headlines now have another factor in play.
There’s a chance a slowdown in chip stocks could spark a broader reckoning on valuations. The S&P 500 holds a 7% gain for 2026 so far, though Thursday highlighted just how much the rally depends on AI names. Oil prices, inflation, and ongoing U.S.-Iran negotiations kept investors on edge.
All eyes turn to Friday’s U.S. nonfarm payrolls report, the next key data point. Reuters’ economist survey puts the April jobs gain at 62,000, a drop from March’s 178,000 rebound. A higher print may keep the Fed firmly in wait-and-see mode; a softer reading could spark a different debate: was Thursday just profit-taking, or are markets bracing for rougher days?
