Tech Stocks Tumble as Investors Shift to Smaller Companies Amid Trade Concerns

U.S. stock index futures dropped on Wednesday, with a notable decline in the Nasdaq 100 due to a sell-off in megacap tech and chip shares. Investors turned to small-cap stocks amid looming trade restrictions and profit-taking, with key economic data and earnings reports also in focus.

U.S. stock index futures slid on Wednesday, as the Nasdaq 100 dropped over 1% with investors selling off megacap tech and chip shares while piling into lagging market areas such as small-cap stocks.

Major tech companies such as Apple, Microsoft, and Alphabet fell in premarket trading, slipping between 0.7% and 1.5%. Semiconductor firms experienced even sharper declines, with Nvidia down 3.1% and ASML tumbling 6.3% after news of potential severe trade restrictions by the Biden Administration targeting Chinese chips.

Additionally, U.S.-listed shares of Taiwan Semiconductor Manufacturing saw a 3.5% drop following comments by Republican presidential candidate Donald Trump, suggesting Taiwan should compensate the U.S. for its defense efforts. However, the small-cap Russell 2000 futures rose 0.2%, as investors shifted their focus from high-performing tech companies to underperforming market areas, supported by growing bets that the Federal Reserve is nearing monetary policy easing.