STMicroelectronics (STMicro) experienced a significant decline in its share price, dropping over 6.8% in Milan and 7.32% to €61.00 on Wednesday, July 23, 2026. This selloff occurred after the chipmaker forecast third-quarter revenue growth of approximately 16% year-over-year to $3.7 billion at the midpoint of its guidance, which fell short of analysts' average estimate of $3.79 billion. This missed forecast has raised questions about the strength and longevity of the AI-driven market recovery, especially given the stock's stellar performance earlier in 2026, which saw it rally 133% year-to-date and over 40% in the past three months.
Despite the recent downturn, STMicro had previously raised its outlook for its data center chip business. In June, the company increased its 2026 data center revenue forecast to $1 billion, up from an earlier estimate of "nicely above $500 million," and anticipated revenue could double to $2 billion in 2027. This optimistic view was shared by analysts, with Barclays upgrading the stock to "Equal Weight" and raising its price target from $34 to $65, citing AI and satellite communications as key growth drivers, projecting $1 billion from AI in 2026 and $2.3 billion in 2027.
The market's reaction suggests a growing concern about the "systemic risk inherent in betting... that the AI trend is a one-way street." Some analysts, like Sumant Wahi of Man Group, describe the current situation as a classic "bubble that everyone sees but that no one wants to exit," leading to increased volatility. The recent stock movements indicate that financial leverage and short-term capital concentrated in these AI-related stocks are now facing scrutiny, as investors start to question the sustainability of the rapid rally and the gap between chipmakers' valuations and their generated cash flows. Investors are also wary of short-term headwinds, including expected seasonal weakness from key customer Apple in Q3.
