NEW YORK, July 2, 2026 — A weaker-than-expected jobs report triggered a sharp rotation out of artificial intelligence hardware stocks on Thursday, with semiconductor ETFs suffering significant losses as investors moved into defensive sectors.
The iShares Semiconductor ETF (SOXX) tumbled 7.0%, while the VanEck Semiconductor ETF (SMH) fell 5.8% by around 2 p.m. ET. Combined price-times-volume turnover for both funds reached approximately $11.6 billion. In contrast, ETFs tracking healthcare, financials, consumer staples, and utilities all posted gains, highlighting a broad shift toward safer assets.
The Labor Department reported that nonfarm payrolls increased by just 57,000 in June, well below the 110,000 gain economists had expected. The unemployment rate ticked up to 4.2%, while labor force participation slipped to 61.5%. Revisions to April and May data subtracted a combined 74,000 jobs. Following the release, market-implied odds for at least one Federal Reserve rate hike this year fell to 76% from around 84% before the data.
The selling was concentrated in AI-related names, with Nvidia (NVDA) dropping 2.4% on turnover of about $15.3 billion. Tesla (TSLA) shares slid 7.8% despite reporting second-quarter deliveries of 480,126 vehicles, well ahead of the 402,776 consensus. David Wagner, head of equity at Aptus Capital Advisors, noted that “big money is still waiting” to see if Tesla can deliver on its AI, robotaxi, and self-driving ambitions.
Meta Platforms (META) fell 4.6% after reports emerged that it is building a cloud business to sell its spare AI computing power, a move that pressured neocloud names like CoreWeave (CRWV) and Nebius Group (NBIS). Gil Luria of D.A. Davidson said the pressure was “more likely to be on neoclouds than the big hyperscalers.”
Despite the selloff, the latest available ETF flow data showed fresh cash entering chip funds as recently as June 30. The VanEck Semiconductor ETF (SMH) attracted $1.01 billion in new creations, while the SPDR S&P 500 ETF (SPY) lost $7.97 billion and the Invesco QQQ Trust (QQQ) saw $3.77 billion in outflows.
Gold prices jumped over 2% as the U.S. dollar weakened, with traders citing reduced expectations for rate hikes. “Less likelihood of potential rate hikes later this year,” said David Meger of High Ridge Futures. Oil prices fell, with Brent sliding to $70.54 and WTI to $67.66, as concerns eased about supply disruptions in the Strait of Hormuz following U.S.-Iran talks in Doha.
The Dow Jones Industrial Average ended roughly flat, but the Nasdaq suffered deeper losses. The Russell 2000 (IWM) dropped 1.4%, while the SPY slipped 0.7%. The Dow (DIA) managed a modest 0.3% gain, underscoring the defensive tone of the session.
U.S. stock exchanges will be closed on Friday, July 3, for the Independence Day holiday. Regular trading hours resume Monday.
