The hot and soaring technology sector lost its momentum with the start of September. This is especially true as the ultra-popular Select Sector SPDR Technology ETF (XLK – Free Report) has dropped about 2.3% so far this week.

The first round of selling came on congressional scrutiny of social media companies and fears of new regulation. Executives from Facebook (FB – Free Report) and Twitter (TWTR – Free Report) testified in front of U.S. lawmakers regarding their measures to combat foreign efforts to influence U.S. politics. The move has raised worries over tighter regulations as the U.S. Department of Justice would discuss concerns that social media platforms are “intentionally stifling the free exchange of ideas” in a meeting on Sep 25. As such, the broad tech sector logged its worst single-day decline since late July on Sep 5.  

A day after, Morgan Stanley’s warnings led to decline in chip stocks. The major Wall Street firm cited weakness in demand for both memory chips — DRAM and NAND — as higher inventory and pricing pressures are building up in the space. Additionally, Micron (MU – Free Report) and KLA Tencor’s cautious outlook at the Citi Global Technology Conference in New York City added to the woes with the PHLX Semiconductor Index dropping 2.7% on Sep 6.

Moreover, trade tensions between the United States and China remained an overhang on the tech stocks. Trump is looking to implement another tariff on $200 billion in Chinese goods as soon as a public-comment period concludes on Sep 7 at midnight. China has warned of retaliation if the United States slaps new tariffs.

Tech ETFs Performance

Among the worst performers, Global X Social Media ETF (SOCL – Free Report) and ARK Innovation ETF (ARKK – Free Report) stole the show, tumbling 5.4% each so far this week. This was followed by declines of 4.6% for Invesco Nasdaq Internet ETF (PNQI – Free Report) , 4.2% for First Trust Nasdaq Semiconductor ETF (FTXL – Free Report) , 4.2% for Ark Web X.0 ETF (ARKW – Free Report) and 3.9% for First Trust Dow Jones Internet Index Fund (FDN – Free Report) .