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Popular tech stocks like Nvidia, Facebook get smoked as investors rotate into bank names

  • FANG stocks, semiconductor names and the NASDAQ Composite all plunged on Wednesday.
  • Meanwhile, the Financial Select Sector SPDR Fund rose nearly 2 percent as investor shifted sector allocations.

Some of the market's best-performing technology stocks so far this year are tanking Wednesday.

So-called FANG stocks all dropped with Facebook down 4 percent, Amazon off by 2.7 percent, Netflix falling 5.5 percent and Google-parent Alphabet lower by 2.4 percent. The PowerShares QQQ Trust (QQQ), which tracks the Nasdaq 100 index, fell 1.7 percent on heavy volume. The fund traded more than 70.4 million shares Wednesday, well above its 30-day volume average of 25.9 million.

Semiconductor names are also falling. Nvidia shares dropped 6.7 percent, while Micron fell 8.7 percent. The VanEck Vectors Semiconductor ETF declined 4.2 percent.

As popular tech stocks fell, the Financial Select Sector SPDR Fund rose 1.7 percent. And the Dow Jones industrial average was still up almost 80 points even with the tech drop.

Nasdaq Composite declined more than 1 percent because of the drop in tech, on pace for its biggest fall in three months.

"It's surprising that you're seeing a pullback this big after such a strong fundamental performance," said Mike Bailey, director of research at FBB Capital Partners, noting that tech earnings have been strong. "I do wonder if there is some rotation going on. The banks' story is getting better after Jerome Powell's testimony."

Earlier this week, Morgan Stanley lowered its ratings on several chip stocks such as Western Digital, Samsung Electronics and Taiwan Semiconductor to equal weight from overweight, sparking a sell-off in the semiconductor sector.

"We think now is the time to reduce exposure to NAND [flash memory] and Asian semiconductor names as the industry has benefitted from sizeable demand tailwinds and unprecedented pricing power, which we see reversing soon," analyst Shawn Kim wrote in a note to clients Sunday entitled "Time For a Pause." "This reflects our negative view of prospects for the global memory industry, which is currently at a peak."

— CNBC's Fred Imbert contributed to this story.