Sell chips, buy software trade returns as chip stocks drag Nasdaq
Semiconductor shares fell sharply while software names advanced, with Salesforce lifted by a $1.6 billion VA contract.
By Sarah Jenkins · Chief Macro Economics Correspondent
· 4 min read
The sell chips, buy software trade resurfaced on Wall Street on Friday as semiconductor stocks weakened and software shares drew buyers during another unsettled week. The Dow Jones Industrial Average rose nearly 200 points, or 0.4%, while the S&P 500 was about flat and the Nasdaq fell roughly 0.5%, according to the CNBC Investing Club.
The pressure was concentrated in chip and hardware-related names after a strong second quarter for semiconductor makers. CNBC Investing Club said investors were reassessing whether the artificial intelligence infrastructure buildout can keep supporting the sector’s recent gains.
Micron fell more than 7%, Sandisk dropped more than 10% and Marvell Technology declined 7%, according to the Investing Club. Intel, which is held in Jim Cramer’s Charitable Trust, slid almost 6% even after what the Investing Club described as strong second-quarter results released Thursday evening.
Why are investors selling chips and buying software?
The rotation reflects a shift inside technology rather than a broad exit from equities, according to the CNBC Investing Club. Hardware stocks that had benefited from AI spending came under pressure, while investors moved into software companies that had lagged.
Software names were among the stronger parts of the technology sector on Friday. Salesforce gained more than 4%, while Workday, Intuit and Adobe also posted gains, according to the Investing Club.
Salesforce’s move followed the company’s announcement of a three-year, $1.6 billion contract with the U.S. Department of Veterans Affairs. The agreement provides VA employees with agentic AI-based tools intended to improve efficiency, according to Salesforce.
The company has already cited stronger public-sector activity. In its May earnings release, Salesforce said annual recurring revenue in its public sector cloud topped $2 billion for the first time, up 23% from a year earlier.
D.A. Davidson analyst Gil Luria told the CNBC Investing Club that the VA award appears to be “significant” because of its size and the importance of the department. He also cautioned that one contract does not resolve Salesforce’s slower growth in recent years, and said participation in a large government deal does not necessarily translate into meaningful profit.
Salesforce shares have risen more than 6% over the past month but remain down nearly 40% in 2026, according to the Investing Club. The stock has been hurt by concern that AI could weaken the company’s seat-based enterprise software model, a view Chief Executive Marc Benioff has pushed back against repeatedly, according to the Investing Club.
Oil, tariffs and the Fed add to market pressure
Oil prices also shaped trading during the week. The CNBC Investing Club said higher crude prices had weighed on stocks, though U.S. benchmark WTI and international benchmark Brent pulled back Friday after Reuters reported that Pakistan was seeking another round of peace talks between the United States and Iran.
The Investing Club said it was cautious about reading too much into one report, noting that headlines around the nearly five-month Middle East conflict have shifted frequently. It also said elevated oil prices can affect bond yields, Federal Reserve policy and the broader global economy.
Trade policy added another layer of uncertainty. President Donald Trump renewed his tariff campaign with a threat of a “substantial” new round of levies on the European Union over the bloc’s treatment of U.S. technology companies, according to the CNBC Investing Club. Earlier Friday, the Trump administration imposed new tariffs on 60 trade partners, citing alleged forced labor in global supply chains.
The coming week is set to bring a heavy earnings calendar, with about one-third of the S&P 500 scheduled to report, according to the Investing Club. Companies due to release results include Corning, Boeing, Procter & Gamble, Meta Platforms, Microsoft, Starbucks, Apple, Amazon, Eaton and Linde, along with Coca-Cola, Qualcomm, Arm Holdings, Seagate, Chipotle, Yum, Visa, Mastercard, Bristol Myers, UPS and Robinhood.
Investors will also watch the Federal Open Market Committee announcement on Wednesday. The CNBC Investing Club said there is rising uncertainty over whether the Fed will raise rates or leave them unchanged at upcoming meetings.
This story draws on original reporting from CNBC.
