BUSINESS

United States chip stocks stumble amid AI questions

▪

Read, Watch or Listen

U.S. semiconductor shares have come under pressure at the start of July after a powerful rally driven by artificial intelligence demand. The Philadelphia Semiconductor Index has dropped more than 11% since hitting a record high in June, though it remains up about 83% for the year. Large chipmakers including Nvidia, Intel, Qualcomm, Marvell Technology, Micron and AMD have all been affected. Recent volatility reflects rich valuations and uncertainty over how long AI-related spending can expand. LSEG Lipper data show roughly $11 billion exited U.S. semiconductor funds in the week ended June 24, following about $12 billion in inflows over the prior two weeks. Analysts still broadly expect robust hyperscaler capital expenditure and see potential for continued earnings growth, with some U.S. brokerages raising price targets on leading chip names.

Prepared by Christopher Adams and reviewed by editorial team.

Timeline of Events

June 2024 Philadelphia Semiconductor Index hits record
June 2024 Semiconductor index begins 11% pullback
Mid-June 2024 About $12 billion semiconductor fund inflows
Week ended June 24 2024 $11 billion semiconductor fund outflows
June 2024 Short interest reaches three-year sector high
By 2027 BofA projects $1.5 trillion AI infrastructure capex
This year S&P 1500 chip earnings expected more than double
Early July 2024 Investors reassess AI-driven chip rally

Why This Matters to You

If you're invested in chip stocks, you've likely seen some losses recently. This is due to uncertainty about how long AI demand can drive growth. It's a good time to review your portfolio and consider your risk tolerance.

The Bottom Line

Despite recent volatility, analysts still see potential for earnings growth in the semiconductor sector. They're expecting robust spending on AI infrastructure. If you're thinking long-term, it might be worth hanging in there. Share this with someone who's into tech stocks.