It's getting ugly out there in semiconductor stock land, but maybe not ugly enough.
Quick insight: The closely watched iShares Semiconductor ETF (SOXX) is down 11% in the past month.
The problem right now is that there are still too many bulls left in the semiconductor space who don't want to believe in the sell-off. If the selling continues, though, they could be forced to capitulate — bringing even more selling pressure to the sector.
"We spent the last few days meeting with clients in NYC, and have had an increasing number of conversations about the semi/AI trade in recent weeks," BTIG strategist Jonathan Krinsky wrote in a note. "While there are certainly some who are in our camp of a larger correction, anecdotally we still get the sense that too many investors are overexposed to this cohort and aren't prepared for further material weakness."
What's behind the move: Semiconductor stocks are under heavy pressure as investors worry that the artificial intelligence spending boom may be cooling after years of extraordinary growth and soaring valuations. The sector is also facing concerns about potential export restrictions, tariffs, and geopolitical tensions that could disrupt chip sales to key international markets.
At the same time, investors are questioning whether demand for AI chips can continue growing fast enough to justify the massive capital spending plans and lofty expectations baked into many semiconductor stock prices.
"AI capex enthusiasm is beginning to cool," strategists at Barclays warned in a note on Friday.
The selling pressure this summer has been most acute in the memory chip space.
The memory chip sector, which was 2026's single hottest trade, has been absolutely obliterated. Micron (MU) is down more than $350 billion in market cap by itself from its highs, while Sandisk (SNDK), Intel (INTC), Applied Materials (AMAT), and Lam Research (LRCX) have each shed more than $100 billion — a bloodbath driven by a toxic cocktail of profit-taking after parabolic gains.
The bottom line: Step in front of this slow-motion chip trainwreck at your own risk!
Brian Sozzi* is Yahoo Finance's Executive Editor, host of the 'Power Players With Brian Sozzi' podcast and a member of Yahoo Finance's editorial leadership team. Follow Sozzi on X** @BrianSozzi**,** Instagram**, and** LinkedIn**. Tips on stories? Email brian.sozzi@yahoofinance.com.*
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