The stocks that have fueled Wall Street’s powerful AI rally are suddenly under pressure as investors evaluate rising tensions in the Middle East, take profits after a historic run and reassess where to find value.
Chipmakers Feel the Heat
After months of hitting record highs, semiconductor chip stocks have dropped in recent weeks, weighing on the broader US stock market. The S&P 500 and Nasdaq Composite are down almost 2% and 5%, respectively, since their record highs on June 2.
The AI boom catapulted chipmakers into the spotlight: The semiconductor and semi equipment industry added nearly half of the S&P 500’s market value gains this year. However, the speed and size of the rally has fueled debate about its sustainability.
“The semiconductor rally was way over its skis,” said Jeff Buchbinder, chief equity strategist at LPL Financial. “Investors were as loaded up with tech stocks, particularly semis, as they ever get.”
Looking Ahead
As Wall Street gears up for another quarterly earnings season, the bar for earnings expectations continues to rise. The so-called hyperscalers, or the Big Tech companies like Microsoft, Meta and Google spending enormous amounts of cash to scale up data centers and AI infrastructure, will be under a microscope.
Spending on AI impacts the outlook for chipmakers. A slowdown in growth could spook some investors, since chipmakers rely on raising forecasts for revenue based on robust demand and a sustained AI buildout.
Original reporting: KEYT (Ventura/Santa Barbara) — read the source article.
