The semiconductor sector saw its best quarter ever, but this ended with wild swings, as evidenced by the VanEck Semiconductor ETF falling 10% in the last five days. Major chipmakers such as Advanced Micro Devices, Intel, Nvidia, Micron Technology, Broadcom, and Marvell Technology experienced declines of 6% to 20%. This volatility followed a period of sustained record-setting gains for AI-related chip stocks.
Several factors contributed to this recent downturn. Initial concerns arose last Thursday after Broadcom reported disappointing earnings, and the situation intensified on Friday with a strong jobs report that dampened hopes for a rate cut in 2026. Experts like Giuseppe Sette, president of AI investment platform Reflexivity, noted that the sector's concentrated ownership, stretched valuations, and high expectations made it vulnerable to shifts in market sentiment. Additionally, unresolved AI chip export issues with China and interest-rate sensitivity played roles.
Micron Technology, despite reporting a blockbuster fiscal Q3 earnings with $41.46 billion in revenue and securing $100 billion in revenue through 2030, saw its stock drop 13% in a single day. This abrupt fall was triggered by a global semiconductor rout, beginning in South Korea with memory rivals SK Hynix and Samsung, who also faced declines over 12%. Rumors of a shift in demand towards next-generation AI memory chips (HBM4) and fears of an overheating AI boom contributed to this panic. Profit-taking also played a significant role, following an earlier 16% surge in Micron's stock to record highs ($1,213).
Other macroeconomic concerns exacerbating the volatility included Apple hinting at raising hardware prices due to high memory costs and reports suggesting OpenAI might delay its highly anticipated IPO to 2027. JPMorgan Chase & Co. strategists, led by Nikolaos Panigirtzoglou, warned that the rebound in chip stocks to record highs was accompanied by increased volatility, raising the risk of market "tantrums" as investors might be forced to cut allocations due to Value-at-Risk limits. The overall sentiment became cautious, with some investors taking profits and repositioning ahead of anticipated major IPOs like SpaceX.
