2026-10-26

Nasdaq 100 Futures Rebound 0.5% as the Week Opens - Chips Are Down 15% This Month While the S&P 500 Is Beating Estimates 82% of the Time, Right Before FOMC and PCE Hit

Written & reviewed by the TradeSmrt editorial team · 2026-10-26

In this article

What Happened
Why Chips Keep Swinging Between Fear and Relief
What to Take Away From This
FAQ
Sources

What Happened

Nasdaq 100 futures climbed 0.5% and S&P 500 futures added 0.3% as Monday, October 26 trading got underway, with Bloomberg describing the move as an attempted rebound after a rough week for the "AI trade." The prior session, Friday, October 23, had been brutal: the Dow Jones Industrial Average plunged 652.82 points (1.23%) to close at 52,215.16 as oil spiked to $117 a barrel, while both the S&P 500 and Nasdaq Composite touched five-week lows, leaving both indexes down for a second straight week.

But this week isn't shaping up as a simple recovery attempt - it's arguably the single most event-packed week of the year so far. On Wednesday, October 28, the Federal Reserve's FOMC delivers its rate decision at 2 p.m. ET, with Chair Kevin Warsh holding a press conference at 2:30 p.m. The very next day, Thursday, October 29, brings the September Personal Consumption Expenditures (PCE) inflation report, which Wall Street expects to accelerate to 3.7% year-over-year from 3.4% previously. In the same week, companies representing roughly 44% of the S&P 500's total market capitalization report third-quarter earnings, with Public Storage, Nucor, Hartford, and Verizon all reporting Monday alone. CNBC summed it up bluntly: "Next week brings major risks for the stock market, just as the AI trade keeps faltering."

What makes this week particularly interesting is that two contradictory stories are unfolding side by side. The first is a genuinely strong earnings season: according to CNBC, roughly 82% of S&P 500 companies that have already reported have beaten consensus estimates, above the historical average of roughly 75-78%. The second, running in the opposite direction, is semiconductors. The same CNBC report noted that the chip sector is down more than 15% this month, with memory-chip names down over 20%. In other words, the earnings season as a whole is holding up just fine - it's specifically chips that are getting hit with double-digit losses.

Nowhere is that split clearer than in memory stocks. Micron (Nasdaq: MU) and SanDisk (Nasdaq: SNDK) have been on a rollercoaster for weeks. The Philadelphia Semiconductor Index (SOX) fell for eight straight sessions through October 16, then dropped more than 6% in a single day on October 22 - its worst one-day decline since June 23 - as fears about hyperscaler capital spending resurfaced following Meta's earnings. Just days later, Micron and SanDisk were bouncing back a few percent at a time, flipping direction almost daily. Behind that rebound sits a genuine supply-side story: research firm TrendForce projects that tight AI-server demand will push fourth-quarter DRAM contract prices up 10-15% quarter-over-quarter and NAND prices up 15-20%. On its September 30 earnings call, Micron said a substantial portion of its fiscal 2027 high-bandwidth memory (HBM) volume was already sold out.

Why Chips Keep Swinging Between Fear and Relief

The reason semiconductors are whipsawing this hard comes down to the fact that a single theme - AI spending - carries three separate, conflicting variables at once: supply, demand, and the cost of financing it all. On the demand side, tight memory supply is pushing prices higher, which is unambiguously good news for a company like Micron or SanDisk that sells memory chips. Hyperscalers are buying memory for AI servers faster than manufacturers can add capacity, which hands pricing power straight to the sellers.

But that exact same force - surging AI capital spending - is also the source of the fear on the other side of the trade. As Meta, Microsoft, Alphabet, and Amazon pour ever-larger sums into AI data centers, the market has grown increasingly nervous about how that spending gets financed. When Meta disclosed on October 22 that it had locked in roughly $825 billion in data-center commitments stretching years into the future, alongside negative $2.1 billion in quarterly free cash flow, investors took it as evidence that AI capex might be burning cash faster than it's generating returns. That worry doesn't just hit the hyperscalers buying the memory - it drags down the chip companies selling it, too. The same dynamic explained why Lam Research's stock fell 8-10% on October 22 despite reporting record quarterly revenue and its first-ever 40%-plus operating margin: a single piece of guidance about shrinking China revenue was enough to override otherwise excellent results. Across the chip supply chain, the question isn't whether AI demand is real - it's whether the capital funding that demand can keep flowing at the same pace.

Layer interest rates on top of that, and you get a third source of volatility. The Fed hiked rates by a quarter point in September - its first hike in roughly three years - bringing the target range to 3.75-4.00%. If this week's PCE reading does land at 3.7% as forecast, more traders are likely to price in a follow-up hike in December; CME FedWatch already shows roughly a 75-78% probability attached to that outcome. Higher rates raise the effective discount rate applied to future cash flows across the entire AI investment cycle, and growth sectors like semiconductors - where a large share of today's valuation rests on future earnings rather than current ones - tend to be the most rate-sensitive of all. Put simply, chip stocks are re-answering two different questions every single day: is AI demand real, and can the capital funding it keep up? The daily swings are the market's way of showing its work.

What to Take Away From This

First, an index's or sector's average move can tell a completely different story from what's happening underneath it. The fact that S&P 500 earnings are beating estimates 82% of the time doesn't cancel out a 15% monthly decline in chip stocks - they're simply describing different things. Before reacting to a headline about "the market" rising or falling, check which side of that headline your actual holdings sit on.

Second, the same piece of news can produce opposite price reactions depending on which side of a transaction a company sits on. Rising hyperscaler capex was read as a demand tailwind for memory sellers and as a cash-flow red flag for the hyperscalers spending the money - both from the identical underlying fact. It's worth building the habit of tracing how a headline actually flows through to a specific company's revenue or cash flow, rather than reacting to the headline itself.

Third, in a highly volatile sector, it's generally more useful to track the medium-term trajectory of supply, demand, and financing costs separately than to chase day-to-day price swings. Memory pricing, which is set gradually over months through contract negotiations, doesn't reverse overnight the way rate expectations or investor sentiment can on a single headline. In a week this loaded with FOMC, PCE, and a flood of earnings all landing within days of each other, the odds of individual sectors reacting in opposite directions - and faster than usual - are higher than normal.

FAQ

Why did chip stocks fall 15% this month while Micron and SanDisk are bouncing back?

Different parts of the semiconductor sector are exposed to different variables. Memory makers benefit directly from tightening DRAM and NAND supply and rising prices, while chip-equipment makers and foundries tend to react more to doubts about whether hyperscalers can keep sustaining their capital spending. The sector's "down 15% this month" figure is also heavily skewed by a sharp single-day drop in mid-October driven by AI-bubble fears; a few days of bouncing individual stocks doesn't necessarily reverse that monthly number.

If the Fed raises rates again on October 28, what happens to chip stocks?

Growth stocks like semiconductors, where valuations lean heavily on future earnings rather than current ones, tend to take a bigger hit when discount rates (interest rates) rise, since it reduces the present value of those future cash flows. That said, markets are currently pricing this particular meeting as a hold, with the real debate centered on a possible December hike - so the forward guidance in the statement and press conference likely matters more than the decision itself this week.

If S&P 500 earnings are beating estimates 82% of the time, does that mean the market is safe right now?

A high beat rate simply means companies are outperforming analyst expectations - it says nothing about whether valuations are reasonable or whether volatility is about to calm down. In fact, it's entirely possible for the index as a whole to post strong earnings while a specific, valuation-heavy sector like semiconductors experiences a sharp pullback at the very same time. It's worth checking headline-level data and your specific holdings' sector exposure separately rather than assuming one tells you about the other.

Sources

This article is an original synthesis and analysis based on the reporting below, not a reproduction of the original articles. Please check the sources directly for the latest exact figures.

⚠️ This article is for informational purposes only and is not investment advice. Market conditions change constantly, so please verify the latest data before making any investment decisions.