Source: Fortune
Summary
The Philadelphia Stock Exchange Semiconductor Index (SOX) plummeted 21% in July, its worst month since October 2008, as investors grew concerned that the boom in artificial intelligence spending may not continue. Despite a two-day 8.3% rally, the SOX is still down 23% from its record high. Analysts expect earnings to continue to grow for companies like Nvidia and Broadcom, but the industry’s long-term outlook is uncertain. The selloff has led to a historic level of activity from retail traders, with record inflows into semiconductor-related exchange-traded funds.
Our Reading
The numbers tell one story. The SOX’s 21% drop in July was its worst month since the global financial crisis. Chip stocks are notoriously cyclical, and many on Wall Street believe this cycle won’t be any different. The earnings explosion seen in the industry is not sustainable, and margins are expected to come in. The question is when and what stocks will do about it. The July selloff erased $2.2 trillion from the SOX’s market capitalization, with particular losers including Taiwan Semiconductor Manufacturing Co., Micron Technology Inc., and Intel Corp. The volatility in chip stocks was met with a historic level of activity from retail traders. The chip trade is coming unglued, and investors are starting to question whether the best days for chip stocks may already be in the past.
Author: Evan Null
