Last Updated on 19/08/2026
Stocks came under pressure on Tuesday, with the S&P 500 falling roughly 0.7% and the NASDAQ sliding more than 1.5%. Semiconductor shares led the decline as credit spreads for several chipmakers widened again, with some even surpassing the highs recorded on July 29.
Equity markets have yet to fully reflect the deterioration seen in semiconductor CDS. This raises the question of whether Tuesday’s decline could mark the beginning of another sharp sell-off in the sector, similar to the plunge witnessed in July.
Nvidia’s credit spreads moved above July levels, although the stock remains significantly higher than it was less than a month ago. Broadcom’s share-price action, meanwhile, appears to be tracking developments in the credit market more closely than Nvidia.
Options positioning could add another layer of pressure. The semiconductor ETF SMH has accumulated substantial positive delta exposure, particularly around the $600 and $550 levels. As time value erodes and call premiums decline, options at $600 and above could lose value rapidly. A break below $550 could accelerate that decay and potentially trigger additional stock selling as hedging positions are unwound.
The largest delta exposure, based on the analysis, is set to expire this Friday, potentially increasing the importance of near-term price movements.
Implied correlations for SMH also rose on Tuesday, moving ahead of the broader market. After remaining subdued for weeks, correlations could continue to increase as earnings season winds down and stock-level dispersion declines.
These factors are largely mechanical and are separate from broader issues such as higher interest rates or geopolitical developments. However, if semiconductor CDS spreads continue to widen while rates rise, the combination of deteriorating credit conditions, options-related flows and higher correlations could make the remainder of the summer more challenging for equities.
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