Shares of the Technology Select Sector SPDR ETF (XLK) tumbled 3.4% to $168.35 on Tuesday, extending a punishing five-session slide of nearly 7% from $180.78, as a cascading global semiconductor rout collided with pre-earnings anxiety and the start of the Federal Reserve's two-day meeting. For holders of the $115 billion fund, the question is whether this week's deluge of results from Big Tech can arrest a selloff now feeding on its own momentum.
Asia's Chip Crash Went Global Overnight
Samsung Electronics closed 13.4% lower — its worst single day in nearly two decades — while SK Hynix dropped 14.7%, dragging South Korea's KOSPI down 10.8% . A Bloomberg gauge of semiconductor shares slumped 7.5% in its biggest decline since April 2025 . That damage traveled west fast: Nvidia fell around 1.2% in premarket while AMD and Intel lost more than 3%, and memory chipmaker Micron dropped nearly 5% . Because XLK holds 76 stocks but behaves like roughly 18 equally weighted positions , concentrated chip and mega-cap names amplify losses disproportionately.
China's Homegrown Chipmaking Tools Threaten the Moat — the Competitive Edge — of Western Suppliers
A Shanghai-based, state-backed company has begun manufacturing advanced chipmaking machines , targeting about five units in 2026 and roughly 20 in 2027 . ASML's stock cratered as much as 12% starting July 27 . The machines still trail Western quality, but investors sold because monopoly assumptions become fragile once a credible domestic alternative reaches a customer floor . For XLK, any structural repricing of chip-equipment names ripples straight through.
$238 Billion in AI Spending Now Needs to Prove Its Worth
Deutsche Bank forecasts that Big Tech management teams will raise 2026 capital-expenditure projections to $238 billion from $215 billion previously . Microsoft, Meta, Amazon, and Apple all report this week . Investors are no longer satisfied with promises; as Apollo Global's Torsten Sløk wrote, "It's not enough now to just say, 'We're spending more.'" Investors want to see whether returns are "accelerating or stalling" .
The Fed Adds Another Layer of Uncertainty
Markets price a 35% chance of a rate hike Wednesday, rising to roughly 80% by September . A hold with hawkish guidance could keep pressure on growth stocks, while any softer tone could help stabilize equities . For a fund trading at nearly 37× earnings, XLK is grappling with that rich valuation at exactly the wrong moment — when higher rates make future profits worth less today.