Stocks: Semiconductor Selloff Weighs on Wall Street - Deutsche Bank

US stocks were mixed on Monday, with concentrated selling in the semiconductor sector pressuring the broader market. Deutsche Bank strategists described the day's trading as a "cautious day," with the S&P 500 slipping as AI-related chip stocks were sold off ahead of Nvidia's earnings report. Although the equal-weight S&P 500 hovered near record highs, indicating decent market breadth, the major indices were dragged down by weakness in the semiconductor sector.

**Chip Stocks Lead the Drag, Momentum Trading Retreats**

The semiconductor sector was the primary source of pressure on the market that day. Market reports indicated that investors chose to exit positions ahead of Nvidia's upcoming earnings report, triggering large-scale selling in both AI chip and memory stocks. Earlier, the Philadelphia Semiconductor Index had posted a cumulative two-day decline of 11%, reflecting significant position unwinding in momentum trades. This defensive rotation left the tech-heavy Nasdaq index notably underperforming the Dow Jones Industrial Average.

**Market Focuses on Nvidia Earnings, Sentiment Turns Defensive**

Current market attention is entirely focused on Nvidia's upcoming earnings report. As the core bellwether of the AI boom, its results will test whether the high valuations across the AI supply chain are justified. Ahead of the report, market caution has clearly intensified, with funds flowing out of the semiconductor sector, which had seen massive gains, and into more stable areas. According to Deutsche Bank, this structural adjustment drove the major indices lower, but the relative strength of the equal-weight index suggests that, apart from a few large-cap tech names, there has been no broad panic selling across the market.