A sell-off that has erased trillions of dollars in semiconductor market value has fallen hardest on the Bay Area’s largest chipmakers, renewing warnings about how closely Sacramento’s revenues track the stock market.
By Staff Reporter
The semiconductor stocks that powered Silicon Valley’s artificial intelligence boom fell for an eighth consecutive trading day on Friday, a losing streak that Yahoo Finance said matches the sector’s longest since the 2008 financial crisis and that has landed squarely on some of the Bay Area’s most valuable companies.
The Philadelphia Semiconductor Index, the benchmark for the industry, dropped 3.8 percent on Friday to close at 11,137.29, according to Yahoo Finance market data. It has now fallen about 15.7 percent from its Oct. 6 close of 13,217.82. Over the seven sessions before Friday, the decline had erased roughly $2 trillion in market value, according to TradingView data cited by Yahoo Finance. The Nasdaq composite fell 2.1 percent on Friday, closing out its worst week since June, CBS News reported.
The losses have been steepest among the companies that make the machines and chips at the heart of the AI build-out, many of them headquartered between Palo Alto and Fremont. From their Oct. 6 closing prices through Friday, shares of Applied Materials, based in Santa Clara, fell 22.8 percent; Lam Research of Fremont, 21 percent; Intel of Santa Clara, 20.1 percent; Advanced Micro Devices of Santa Clara, 18.6 percent; KLA of Milpitas, 16.1 percent; Broadcom of Palo Alto, 12.5 percent; and Nvidia of Santa Clara, 10.5 percent, according to closing prices compiled by The Inquirer. Apple, whose business depends less on data-center spending, rose 2.9 percent over the same stretch.
Debt, rates and competition
Early in the week, reports that China’s ChangXin Memory Technologies had advanced its memory-chip technology raised competitive concerns for producers such as Micron, according to Schwab Network. Attention then shifted to how the AI build-out is being financed, particularly by so-called neocloud companies that rent out computing power and fund their expansion with borrowed money.
CoreWeave, a New Jersey-based neocloud and a major buyer of Nvidia’s processors, fell nearly 12 percent on Friday and roughly a quarter for the week. Its own filings show why investors are focused on its balance sheet. The company reported in its quarterly report to the Securities and Exchange Commission in August that it raised $16.7 billion from new long-term debt in the first six months of 2026, compared with $11.8 billion in all of 2025.
Borrowing costs are rising across the economy. The yield on the 10-year Treasury note held near 5.1 percent on Friday, and futures traders put the odds of a Federal Reserve rate increase in December at 74.3 percent, up from 50.2 percent a month earlier, according to CME FedWatch data cited by CBS News. CBS also reported, citing Reuters, that investors in Anthropic, the San Francisco AI developer preparing to go public, were considering a valuation of $1.5 trillion, down from an earlier target of $2 trillion.
Not every strategist reads the slide as a turning point. The semiconductor index remains up nearly 60 percent for the year, Yahoo Finance noted, and Brett Pachuba of SpotGamma cautioned on CNBC that investors could miss a rebound. “I still believe that there remains a real right tail risk in this market where if you are underinvested to the upside, and we get positive news out of say a Meta or a Google… then there could be a real strong upside chase,” he said.
Why Sacramento is watching
For California, the stakes extend well beyond brokerage accounts. The state’s progressive income tax depends heavily on high earners whose incomes are tied to capital gains and stock-based pay, and the Legislative Analyst’s Office has spent much of the year warning about that exposure.
In a December analysis, the analyst’s office estimated that income tax withheld on stock compensation at California’s large technology companies accounts for about 10 percent of all state income tax withholding, roughly $10 billion a year, because vesting shares are taxed as ordinary income at the day’s market price. When those share prices fall, so does the withholding on every subsequent vesting.
In January, Legislative Analyst Gabriel Petek wrote that the state’s revenue strength was being “fueled by a very bullish stock market” rather than broad-based growth, and that the governor’s revenue estimate was $30 billion above his office’s because it did not explicitly account for the risk of a downturn.
History offers a guide to what would matter. In a March review of past downturns, the office found that short-lived corrections, including the 2025 tariff sell-off, “have had minimal lasting impact on state income taxes.” Major downturns were another matter: state income tax revenue fell 17 to 30 percent and took years to recover, with revenue typically lagging market turning points by six to 12 months.
So far, the state’s cash position remains strong. The Department of Finance’s October bulletin reported that General Fund receipts in September came in $2.9 billion, or 14.9 percent, above the budget forecast, and $5.5 billion above projections since April.
Jobs and what comes next
The sell-off is too recent to show up in layoff filings, which employers generally must submit 60 days in advance. Notices processed by the state Employment Development Department from July 1 through Oct. 14 covered 17,617 workers statewide, 7,689 of them in the nine Bay Area counties, according to the department’s WARN report. The largest Bay Area notices came from outside the chip sector, among them Covenant Aviation Security at San Francisco International Airport, Visa in Foster City, Oracle in Redwood City and PayPal in San Jose. Intel filed notices in July and September covering 155 workers at its Santa Clara campus.
The next test arrives with third-quarter earnings. Netflix, based in Los Gatos, is scheduled to report on Tuesday, and the region’s largest technology companies follow in the coming weeks. For investors, the question is whether AI demand justifies the spending. For Sacramento, where a new governor will present a budget in January, it is whether an eight-day slide remains a correction or becomes the downturn the Legislature’s own analysts have warned about.
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