Chip stocks dragged the Nasdaq down 5.5% into a correction

Chip stocks led a selloff on Thursday, Nov. 5, that put the Nasdaq Composite into a correction. The index fell 5.5% to 24,315, 11.9% under its Oct. 6 close. Reuters reported that close as the record, and said a 10% drop from a record close is widely considered a correction.

Chip stocks

The chip selloff had two reported causes. CNBC reported that investors fear a Democratic sweep of both chambers of Congress, and wins in key governors' races, could slow data-center construction. NBC News reported that lackluster results from Qualcomm and Arm Holdings on Wednesday night triggered the selloff, and that investors viewed both reports as mixed.

The PHLX Semiconductor Sector Index, the Philadelphia chip benchmark, fell 12.2%. iShares Semiconductor ETF SOXX fell 12.1%, and VanEck Semiconductor ETF SMH fell 11.2%.

Nvidia fell 9.3%, Broadcom 10.4% and Taiwan Semiconductor Manufacturing 10.8%. Invesco QQQ Trust, Series 1, QQQ, fell 6.5%.

Qualcomm fell 9.5%. CNBC said adjusted earnings of $2.17 a share and adjusted revenue of $10.44 billion topped estimates, and that the earnings forecast of $2.15 to $2.35 a share was lighter than the $2.27 analysts expected.

Arm Holdings fell 13.1%. Reuters reported Wednesday that its revenue forecast of $1.54 billion was only marginally ahead of the $1.53 billion estimate, and that the outlook disappointed investors.

Micron Technology fell 17.5%. Roundhill Memory ETF DRAM fell 18.0%. Advanced Micro Devices, a processor designer, fell 17.3%.

Direxion Daily Semiconductor Bull 3X ETF SOXL fell 38.7%, and Direxion Daily Semiconductor Bear 3X ETF SOXS rose 39.2%. Those funds are built to multiply a semiconductor index's move for a single day, in opposite directions.

The S&P 500 fell 4.3%. Invesco S&P 500 Equal Weight ETF RSP fell 2.9%, so the biggest stocks fell harder, but the average stock in the index fell too.

The Cboe Volatility Index, a measure of expected swings in the S&P 500, rose 69.7% to 28.18. ProShares VIX Short-Term Futures ETF VIXY rose 29.7%. The fund holds short-term futures, so it did not match the index.

Stocks that moved on their own results

The day's biggest single-stock moves had nothing to do with chips.

MNTN, which sells ads on internet-connected televisions, fell 54.7%. Third-quarter revenue rose 15% to $80.3 million, below the $86 million to $89 million it had set out in August, and the company cut full-year revenue guidance to $311 million to $314 million from $347 million to $357 million, in its Nov. 4 release. Patrick Pohlen, chief financial officer, said unforeseen problems in the sales organization had affected revenue.

Veracyte, a cancer diagnostics company, fell 54.3%. On Thursday's earnings call, Chief Executive Marc Stapley said volume for its Decipher Prostate test was about 1,000 tests below the company's own expectation, and that growth in the test is now normalizing. The company reset how many more of those tests it expects to add each year, to 12,000 to 15,000 tests.

AppLovin rose 31% to $356.10. The company said Wednesday that third-quarter revenue rose 55% from a year earlier to $2.185 billion, and net income rose 72% to $1.44 billion, or $4.30 a share, in its Nov. 4 release. MarketWatch, citing FactSet, said analysts had expected $2.07 billion of revenue and $4.03 a share.

AppLovin guided the fourth quarter to revenue of $2.365 billion to $2.395 billion. MarketWatch also reported a $3.2 billion increase in the buyback authorization.