U.S. chip stocks, the main driver of Wall Street’s rally in recent months, had a volatile week. The Philadelphia Semiconductor Index hit an all-time high after rising more than 100% in less than three months, then fell 7.8% the next day before stabilizing on Wednesday. Big names such as Intel and AMD dropped 6% to 8% on Tuesday and then moved only slightly, while Qualcomm fell 8% on Tuesday and kept weakening afterward.
The sharpest move came from Micron, whose shares fell 13.2% on Tuesday amid fears that analyst expectations for its earnings were too high. After the market closed on Wednesday, Micron reported very strong results that eased those concerns, sending the stock up by double digits in after-hours trading and lifting the whole sector. Reuters attributed the broader volatility to rising costs of building AI infrastructure, much of it debt-financed, combined with a more hawkish U.S. Federal Reserve and record-high valuations.
Julius Baer’s Matthew Rachtr said investors have been cutting exposure to technology, especially semiconductors. He said the correction highlights the risks of an increasingly concentrated market leadership, adding that investors are still digesting last week’s hawkish Fed meeting and are pricing in a rate hike by October. He also said some investors are reassessing the most optimistic assumptions about AI demand growth, but sees no sign that the AI investment cycle is ending.
Other analysts remained bullish. Wedbush’s Dan Ives told CNBC that current trends and AI demand show no “cracks in the armor,” arguing the decline mainly reflects the earlier surge. Cantor’s C.J. Muse said the firm’s multi-year bullish view remains unchanged and named Micron, Sandisk, Nvidia, Broadcom, AMD and ASML among preferred stocks, while warning that the sector could stay more volatile after such a strong run.
Bank of America raised its 2030 semiconductor market forecast to $2.7 trillion from $2.3 trillion, assuming 28% average annual growth instead of 23%, driven by AI data centers, memory, semicap equipment, power-management components and AI agents. It also raised ASML’s target price to 2,022 euros from 1,921 euros, citing long-term DRAM agreements and strong AI and server demand. Micron’s latest quarter beat expectations, with revenue of $41.5 billion versus $9.3 billion a year earlier and $23.9 billion in the prior quarter, and net profit of $28.2 billion, up 15-fold. For the fiscal fourth quarter, it guided to about $50 billion in revenue, an 86% gross margin, and earnings of $30.7 per share under GAAP and $31 under non-GAAP. Micron is up 268% this year and briefly topped $1 trillion in market value, while SK Hynix has filed for a concurrent Nasdaq listing and plans to raise more than $29 billion.
