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CHIP INDEX PLUNGES 40% FROM INTRADAY RECORD

The Philadelphia semiconductor index .SOX is down more than 7% on Friday, and at one point sinking a stunning 40.5% from its July intraday all-time high.

The SOX lost a whopping 9.9% in Thursday's session alone after U.S. President Donald Trump announced the steepest global tariffs in a century. Selling has extended on Friday after China, who was hit with additional tariffs, retaliated.

So, putting the two days together, it looks like it's on track for its biggest two-day sell off on record, surpassing its previous 2-day record decline of 15.96% in March 2020.

Its biggest decliners on Friday were Micron MU.O, tumbling almost 12%, and Marvel Technology MRVL.O, down almost 11%. Meanwhile artificial intelligence chip leader Nvidia NVDA.O is last off more than 7% after touching its lowest level since August.

"People are freaked out and you're going to sell your winners first rather than your losers. That's why semiconductors are being punished," said Kim Forrest, chief investment officer at Bokeh Capital Partners in Pittsburgh.

While the whole market is getting slammed on Friday, chips are among the hardest hit. It's partly to do with the fact that the sector had risen sharply in recent years, doing more than its fair share of the work to boost to broader indexes, as investors bet on the promise of swelling demand related to AI.

Also, the sector is particularly vulnerable to both China and U.S. tariffs as many chip companies design their chips in the United states, but have them manufactured in China, potentially hitting them with a double-whammy of levies.

At some point, Forrest says she is "hopeful that tariffs will be settled at a much lower point than they are now and that trade will resume."

And she points out that "a lot of these chips are really specialized and there are no replacements so people need them eventually."

"At some point the rate of (stock) selling will slow down, and if you look at it on a fundamental level, even with lower demand because of the tariffs, the prices will look favorable and people will buy again," said Forrest.

But for now she described Friday's moves as "fear prices."

"It's not about valuation or any fundamentals. At some point fear exhaustion will kick in because the people who are afraid don't have any more to sell," she said.

But until then the CIO suggests staying on the side.

"Don't get in the way of fears. Catching the proverbial knife isn't what I'm going to do," said Forrest.

(Sinéad Carew)

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FOR FRIDAY'S EARLIER LIVE MARKETS POSTS:

U.S. STOCKS PARE LOSSES; POWELL EMPHASIZES ECONOMIC UNCERTAINTY - CLICK HERE

OH, WAS PAYROLLS THIS MORNING? A JOBS REPORT DEEP DIVE - CLICK HERE

MOST PESSIMISM SINCE FINANCIAL CRISIS BEAR WAS ENDING - AAII - CLICK HERE

U.S. STOCK FUTURES RATTLED AFTER CHINA RETALIATORY TARIFFS, PAYROLL DATA - CLICK HERE

DON'T FORGET ABOUT PAYROLLS - CLICK HERE

BANKS LEAD EUROPEAN SHARES LOWER, STOXX SET FOR BIGGEST WEEKLY FALL IN THREE YEARS - CLICK HERE

EUROPE BEFORE THE BELL: FUTURES EDGE DOWN AFTER THURSDAY'S SHARP SELL-OFF - CLICK HERE

WALL STREET HAS MOST TO LOSE FROM TRUST LOST - CLICK HERE