Semiconductors fell for a second straight session on July 2, and this time the damage was hard to wave away. The VanEck Semiconductor ETF (SMH) dropped 4.5%, dragged down by a brutal 13.6% decline in Teradyne and an 11.5% slide in KLA. Nvidia slipped 1.4%, while Micron lost another 5.5% on top of a rough Wednesday. For a sector that has carried the entire market for most of 2026, two red days in a row is enough to make people nervous, especially when the rest of the market is quietly setting records at the same time.

While chips were bleeding, the Dow Jones Industrial Average closed at a record 52,900.07 on July 2, up 594.83 points, or 1.14%, and touched an intraday all time high of 52,903.85. The gains came from names nobody was excited about six months ago. Apple rose nearly 5%, while Visa and Walmart both added around 3%. Traders have started calling this the great rotation, money moving out of the hottest AI names and into the boring, dividend paying parts of the market. It is not a market crash. It is a market getting nervous about where it put all its chips, literally.

The selling started a session earlier, on July 1, when broader worries about the Fed staying restrictive for longer already had Europe and the U.S. on edge. Then came the headlines that turned a soft day into a chip-specific rout. Reports surfaced that OpenAI was in talks to sell a 5% stake to the U.S. government, and Meta disclosed it may monetize its excess compute capacity, both signals that read as a warning about how much AI infrastructure demand can really absorb. SanDisk fell more than 10% that day alone, though the stock is still up over 750% for the year. The read across Wall Street was simple. Investors are no longer assuming AI capital spending grows forever, and any hint that the biggest buyers might slow down is enough to hit every stock that sells them the picks and shovels.

Zoom out and the picture looks a lot calmer. The Dow climbed 8.9% in the first half of 2026, its best first half since 2021. The S&P 500 rose 9.6%, the Nasdaq gained 12.8%, and the small cap Russell 2000 surged nearly 22%, its best first half since 1991. A two day chip wobble barely registers against that backdrop. What it does show is that the market has started to question valuations after one of the strongest runs in decades, and that kind of questioning usually shows up first in the stocks that ran the hardest.

With 20 years of investment expertise, Caleb Gan is a seasoned professional in stock trading. The hard work and dedication were recognized when his partner and him were featured on Singapore TV Channel 9's MoneyWeek, a prominent financial program. He's also had the privilege to share insights on radio stations like 93.8Live, Capital 95.8FM, and 96.3FM through live interviews about stock market investments. Beyond that, he's also the co-founder of NDU System, where he continues to help others navigate the world of trading.

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