Key Highlights

● The PHLX Semiconductor index fell to 11,518.20 after four straight gains.

● Marvell tumbled to $218.34 amid reports of advanced talks to acquire Lumentum.

● KLA jumped after record fiscal first-quarter Revenue of $4.14 billion.

● Intel plunged after hours on fourth-quarter revenue guidance well below expectations.

Chip stocks broke their winning run on Thursday as AI spending worries, deal reports and a memory pullback hit the sector.

The streak ends

The PHLX Semiconductor Index had climbed for four straight sessions heading into Thursday. That run ended as the index fell to 11,518.20, according to market data, on a day when investors pulled money from the most AI-exposed corners of the market.

The decline was part of a broader tech retreat. The Nasdaq Composite dropped 365.13 points to 26,184.72, the S&P 500 slipped 23.59 points to 7,720.39 and the information technology sector finished lower. The trigger was Alphabet (NASDAQ:GOOGL)'s worst day since its 2004 IPO, after results that one report said "reignited concerns over mounting AI costs."

Marvell leads the decline

The biggest chip loser was Marvell Technology (NASDAQ:MRVL), which tumbled to $218.34, according to market data. One media report said Marvell is in advanced talks to acquire Lumentum (NASDAQ:LITE), the optical components maker, and another source said a deal could come as soon as next week. No terms have been confirmed.

Lumentum's shares rose early on the report before giving back most of the gain to close slightly higher.

Memory cools off

Memory stocks also retreated. Micron (NASDAQ:MU) fell to $934.27, with market data describing the move as part of a broader cooling in memory names amid AI capex worries. No company-specific news was found for Micron. Sandisk (NASDAQ:SNDK) also declined during the regular session before reporting results after the close.

AMD (NASDAQ:AMD) fell to $566.42, moving with the sector without company-specific news. Arm Holdings (NASDAQ:ARM) slid as well, with one source noting no company news ahead of its report in early November.

Nvidia (NASDAQ:NVDA) closed at $213.66, down modestly. One report noted a Justice Department inquiry into its $12.93 billion Hugging Face acquisition.

The outlier: KLA

Not every chip stock fell. KLA (NASDAQ:KLAC), the chip equipment maker, jumped after reporting record fiscal first-quarter revenue of $4.14 billion and adjusted Earnings of $1.22 a share, both above consensus, according to market data. It guided to fiscal second-quarter revenue of about $4.7 billion and adjusted earnings of $1.44 at the midpoint, also above projections.

KLA's gain shows investors are still willing to reward chip companies that deliver strong numbers and forward guidance, even on a day of sector-wide selling.

After the bell, more pressure

The evening brought further strain. Intel (NASDAQ:INTC), which had closed at $92.07, plunged after hours after guiding fourth-quarter revenue to $15.0 billion to $16.0 billion, well below the roughly $17 billion analysts expected. Adjusted earnings guidance of $0.25 a share also trailed the $0.43 consensus.

Sandisk reported strong results, with adjusted earnings of $49.51 a share and revenue of $11.0 billion, and announced an 8-for-1 stock split. Its after-hours reaction was mixed across sources.

On the positive side, Monolithic Power Systems (NASDAQ:MPWR) reported its first quarter above $1 billion in revenue, at $1.20 billion, and guided above consensus, edging higher after hours.

Rotation elsewhere

The broader market was far healthier than the chip index. More than 400 S&P 500 members rose, the Russell 2000 gained 28.71 points to 2,859.22, and health care led all sectors. One market strategist said, "Money is rotating within the market rather than leaving it."

What to watch

Friday's session will show how chip stocks digest Intel's guidance and Amazon (NASDAQ:AMZN)'s after-hours decline, which pushed Nasdaq-100 futures lower, according to market data.

The Marvell-Lumentum talks are a key story. If a deal is announced, investors will scrutinize the price and strategic rationale. Arm's report in early November is another catalyst.

Most important, chip stocks remain tied to Big Tech's capex plans. Alphabet and Amazon have both kept their spending targets intact, which supports demand. The question is whether investors keep paying up for that Demand while spending outpaces Cash Flow at the biggest buyers.