Semiconductor selloff deepens as chip stocks slide and banks issue margin calls

U.S. stocks fell sharply on Wednesday as weakness in semiconductor shares persisted ahead of major technology earnings and the Federal Reserve's rate decision. The S&P 500 dropped 0.8%, the Nasdaq 100 fell 1% and the Dow lost 800 points, a reversal from the earlier session in which the Dow had outperformed while chip and AI-linked stocks slid. Microsoft and Meta each fell 0.5% before reporting results, with investors closely watching for signals on AI infrastructure spending after concerns that capital expenditure may be running ahead of returns. Micron, Applied Materials and Sandisk fell between 4% and 8% after pessimistic results from SK Hynix added to pressure across the sector. The broader semiconductor retreat follows an earlier 4.49% drop in the Philadelphia Semiconductor Index, reported margin calls by Goldman Sachs and JPMorgan on some hedge-fund clients, and Goldman's disclosure that 16% of its prime brokerage risk exposure was tied to AI memory chip stocks as of June 30. Markets were also focused on a Fed decision that is expected to leave rates unchanged, though possible dissents in favor of a hike underscored signs of division within the FOMC. Oil prices rose on fresh strikes between Iran and the U.S., adding to inflation concerns, while Visa gained 1% after reporting quarterly revenue growth.