Tech Sector Drops as Caution Ahead of AI Earnings Hits Hardware

On Monday, August 24, the Information Technology sector fell -1.6%, while the sector's main exchange-traded fund, Technology Select Sector SPDR Fund (XLK), closed at $180.05, down -1.8%. The Associated Press reported that technology shares faced broad pressure as investors grew cautious over whether artificial intelligence valuations had expanded too quickly ahead of major chipmaker earnings. Yahoo Finance reported that surging memory costs raised concerns about higher server pricing, prompting selloffs across computer storage and semiconductor equipment makers.

Selling was widespread across the sector. The equal-weighted return was -1.7%, closely tracking the market-cap-weighted decline and showing that smaller technology names fell alongside the largest index constituents. Sector breadth deteriorated sharply, with only 15 of 74 advancing. Declines were led by Seagate Technology PLC (-6.5%), which dropped as part of the broader hardware and memory selloff. On the positive side, Godaddy Inc (+3.6%) and Gartner Inc (+3.5%) bucked the trend. Gartner announced a forecast projecting worldwide semiconductor revenue to reach $1.6 trillion in 2026, driven by artificial intelligence infrastructure demand. Our sources show no reported company-specific catalyst behind the advance in GoDaddy.

Global developments also weighed on the sector during the session. Reuters reported that technology sentiment was dampened by international developments, including a discounted share sale by Alibaba and Samsung's smaller-than-expected shareholder return plan. Investing.com reported that geopolitical uncertainty surrounding potential new sanctions added to market-wide caution across growth assets.

Investors accessing the group through Technology Select Sector SPDR Fund (XLK) pay an expense ratio of 0.08% to hold its $115.4 billion portfolio. EasyAlpha grades each company against its industry peers. Across the 99.9% of fund weight that is graded, 38.2% sits in companies graded A or B. Companies graded A or B have stronger fundamentals, and historically they have carried a lower risk of large drawdowns than companies graded D or E.