New York, New York — Tuesday, July 28, 2026
A two-cent gain rarely makes headlines. On Monday, it did. The S&P 500 nudges higher Monday, closing up just 0.02%, and that razor-thin advance was enough to end a three-session skid that had investors bracing for a rougher week. The real story, though, sat one layer down: chip stocks recover selloff losses that began building last Friday, clawing back ground even as the sector as a whole stayed deep in the red. Blue-chip names carried the tape higher, with the Dow 260 points higher, while the Nasdaq barely moved, down a fraction of a percent as traders sorted winners from losers inside a semiconductor sector that has whipsawed for two straight weeks.
This session showed what Wall Street strategists have been saying for months: the market is no longer acting in unison. Software and large tech companies are driving gains, while chipmakers are dealing with the ups and downs caused by China’s fast-growing semiconductor industry.
A Fragile Recovery in Chip Stocks
It was more of a bounce than a full rebound. Semiconductor stocks started Monday strong after ChangXin Memory Technologies, a Chinese memory-chip company, had a major IPO on the Shanghai Stock Exchange. Traders saw this as a sign that global chip demand is still solid, and futures for chip-heavy indexes rose before the market opened.
That optimism diminished rapidly. Reports came out that Chinese manufacturers are working on their own deep ultraviolet lithography machines, the specialized equipment used to make silicon chips, a field long led by Dutch supplier ASML. For an industry already worried about the pace of AI spending, this news was a shock. It turned China from a customer into a competitor in just a few hours, and the sector’s early gains disappeared by midday.
By the closing bell, the damage was contained but visible. The SMH ETF, 2 percent lower, told the headline story: the VanEck Semiconductor ETF, which follows the industry’s top companies, continued a decline that started on Friday. This was the fund’s fourth significant drop in a month, even though the wider Philadelphia Semiconductor Index is still up a lot for the year.
Where the Pressure Landed Hardest
The moves in individual stocks showed how uneven Monday’s trading was. AMD Teradyne decline 4-5 percent, capturing the two biggest single-day laggards among chip stocks, with Advanced Micro Devices dropping about 5% and testing equipment maker Teradyne falling nearly 4%. Both companies are heavily involved in AI infrastructure spending, making them stand-ins for how investors feel about the sector’s main growth story and its biggest risk.
Memory-chip giant Micron Technology also slid; early commentary on the move cited Micron sheds 3 percent, though Monday’s closing tape put the decline closer to 2%, as investors considered the company’s exposure to Chinese competition against strong demand for high-bandwidth memory in data centers. Dutch equipment maker ASML, whose lithography machines were at the center of Monday’s concerns, dropped nearly 6% in US trading, showing how much the DUV news affected the supply chain.
Blue Chips Do the Heavy Lifting
While chip stocks struggled, the Dow Jones Industrial Average had a steady session. Industrial and financial stocks made up for the weakness in semiconductors, and the index finished at a new high for the week. Traders also noted that falling oil prices helped: crude dropped again on Monday, lowering costs for transportation and manufacturing companies and allowing the Dow to rise even as growth stocks slowed.
This split—industrials rising, chips falling, and software staying steady—is becoming a common pattern this earnings season. Portfolio managers see it not as a rotation, but as a review. Thomas Martin, a senior portfolio manager focused on technology, told financial media that uncertainty about Chinese competitors is now a lasting concern, not just a one-day worry, because product markets are tight and Chinese suppliers are advancing quickly.
A Market Increasingly Split in Two
In recent weeks, the link between chip-focused and software-focused technology funds has weakened, dropping from a long-term average of about 0.75 to nearly zero. In simple terms, owning ‘tech’ stocks no longer means making just one bet. Cybersecurity and data-protection companies have quietly done well, while memory and equipment makers have taken up most of the sector’s hits.
For headline writers, S&P 500 nudges higher chips recover’ summed up Monday in five words: modest gains for the overall market, while the chip industry is still trying to stabilize. For traders watching closely, ‘Dow 260 points higher Monday session’ was the key number, showing that chip sector troubles did not stop the wider rally.
What Investors Should Watch This Week
Monday’s session was just a preview. The Federal Reserve’s next rate decision arrives midweek, and several Magnificent Seven earnings reports—led by Microsoft and Meta, with Apple close behind—will test if AI-related spending can support current stock prices. If there are signs that big tech companies are cutting back on infrastructure budgets, it could hurt chip stocks again just as they seemed to be recovering.
In the long run, the competitive threat from Chinese semiconductor makers is here to stay. Domestic lithography development, once thought to be years away, is now moving faster, forcing US chipmakers and investors to rethink risks as they happen. Whether Monday’s partial recovery lasts or is just a short break before another drop will depend more on what companies say about spending, competition, and demand in the coming days than on Monday’s numbers. For now, the market is showing strong confidence in the US economy but is watching anything related to advanced chip manufacturing much more closely.
Source: Dow closes more than 250 points higher, aided by cooling oil prices
