Semiconductors Break Down as Apple Holds and Margin Risk Spreads

The main story this morning is the breakdown in semiconductors. E-mini S&P 500 Futures (ES) are down 21 points, which is not even one third of 1%, so the broader market is weaker, but this is not a major selloff yet. The real pressure is concentrated in technology, especially memory and semiconductor stocks.

Taiwan Semiconductor Manufacturing Company Limited (TSM) beat earnings and revenue expectations, but the stock still fell about 5%. The market is looking beyond the headline numbers. The company raised planned capital spending from $56 billion to between $60 billion and $64 billion, a 39% increase, while also guiding toward weaker profit margins.

There was also a quality issue with the earnings. About $2 billion of additional profit came from non operating income tied to a stake sale, not from the core business. Once you remove that $2 billion pre tax gain, the earnings beat does not look nearly as strong.

Micron Technology, Inc. (MU) traded near $1,250 just a few weeks ago. It fell as low as $851 this morning, bounced toward $860, and remains well below yesterday’s $904 close. The major support zone is between $815 and $755. A move into that range could produce a temporary rebound of 50 to 100 points, but that would not necessarily mean the larger decline is finished.

Micron is also a good example of why a low price to earnings ratio can be misleading in cyclical companies. In past cycles, the stock moved from about $5 to $36, a gain of roughly 600%, before eventually falling around 75%. In cyclical industries, earnings are often strongest and the price to earnings ratio is often lowest near the top of the cycle.

SanDisk Corporation (SNDK) is also breaking down. The next support area is around $1,300 to $1,290. At that point, the stock would be more than $1,000 below its highs after previously trading above $2,000. Seagate Technology Holdings plc (STX) has a major gap near $733. Arm Holdings plc (ARM) has a shorter term level near $256 and a stronger swing support level near $234.

Apple Inc. (AAPL) is holding up better because money is rotating away from semiconductors. Apple has gained about 20% in three weeks, adding roughly $1 trillion in market value. Major resistance is near $430. If semiconductor stocks reach support and begin bouncing, some of the money that moved into Apple could rotate back out.

Space Exploration Technologies Corp. (SPCX) is another example of what happens when excitement gets ahead of price. The stock came public at $150, experienced about three days of aggressive retail buying, and is now below 135. Investors had roughly six days to exit before the stock returned to its offering area and moved lower.

The larger risk comes after earnings, when major share unlocks begin. Some early holders may have entry prices near $0.50, so whether the stock trades at 135, 140, or 150 may not matter much to them. With a valuation near $1.7 trillion and potentially hundreds of millions of shares eventually reaching the market, selling pressure could remain significant.

Outside technology, the economic picture is mixed. Retail sales matched expectations, but the core number excluding food and energy was weaker. That suggests consumers are still paying for essentials while pulling back elsewhere. Philadelphia manufacturing was stronger than expected, and initial jobless claims remained historically low at about 208,000.

Gold Futures (GC) are weakening as the dollar rises. If the current trend line breaks, the next area is around $3,600 to $3,500. Silver Futures (SI) are down about 3%. Support is near $54, followed by $50, with a deeper area around $45 to $46.

West Texas Intermediate Crude Oil Futures (CL) remain relatively flat, with the next stated target near $87. Henry Hub Natural Gas Futures (NG) are still holding support.

UnitedHealth Group Incorporated (UNH) is stronger after earnings, with shorter term resistance near $482 and a larger gap near $585. Netflix, Inc. (NFLX) reports after the close. A sharp decline could bring the stock toward $68.70. Expectations are around $0.79 per share on $12.57 billion in revenue, with roughly a $0.05 beat already anticipated.

Bitcoin (BTC) is also pulling back with technology stocks. The key level remains $64,000. As long as Bitcoin avoids a close below $64,000, the current setup remains intact.

The bigger message is simple: the broader market is not collapsing, but the semiconductor cycle is showing real cracks. High expectations, heavy spending, margin pressure, and crowded positioning are finally starting to matter.