A closely followed basket of semiconductor names wiped out $1.6 trillion in market value across a six-day losing streak as investors fretted about interest rates, frothy valuations, and the sky high bill for AI buildouts. Over the same stretch, the Philadelphia Semiconductor Index fell 12% - its longest losing run since May 2025 - including a 4.3% drop on Wednesday.
Pain was widespread. A majority of the index's constituents were down 10% or more over the span. Arm Holdings sank 21%, Applied Materials shed 16%, and Intel fell 13%. GlobalFoundries stood out as the only stock in the green.
The selloff in the global AI trade, led in large part by chip stocks, picked up after a hotter-than-expected September inflation print reinforced the risk of further Federal Reserve rate hikes, even if officials pause at the meeting later this month. Broadcom CEO Hock Tan also likened some AI-chasing investors to gamblers and cautioned the sector could run into funding constraints.
The weakness showed up beyond chips too. The Nasdaq 100 slid more than 2% for its worst day since late July, and the S&P 500 fell 1.1%. For reference, recent chip-move tallies use Oct. 6 closing prices as the baseline.
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"Pressure has ratcheted up on global chip stocks in recent days," Ulrike Hoffmann-Burchardi at UBS Chief Investment Office wrote. "While increased competition within AI, rising financing requirements, and higher rates may periodically add to volatility, we view this latest bout as more of a recalibration of expectations than a fundamental break in the AI investment story." She added, "We suggest investors focus on where AI spending is translating into sustainable earnings growth and broader enterprise and consumer adoption."
JPMorgan's Nikolaos Panigirtzoglou flagged why this downdraft looks tougher than late July's correction for AI infrastructure names, citing in an Oct. 14 note: a "lack of 'buy the dip' behavior by retail investors thus far despite ongoing inflows into equity funds overall, a buyback flow cliff, the lack of a large short base and the more elevated AUM of leveraged equity ETFs." His takeaway: "Despite the recent drawdown, cyclical stocks do not appear oversold from a positioning or flow perspective."
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