Chip Stocks Plunge, Wiping Out $1.3 Trillion in Market Value Amid AI Sector Selloff

Leading chipmakers including NVIDIA, Micron Technology, and Advanced Micro Devices posted significant losses, following a disappointing earnings report from Broadcom that triggered a broader technology-sector retreat.

The benchmark PHLX Semiconductor Index fell 10.3% in a single session, marking its steepest one-day decline since the market turmoil caused by the COVID-19 pandemic in March 2020. Selling pressure began on Thursday after Broadcom reported that demand for its custom AI chips had failed to meet investors’ exceptionally high expectations.

Over the past two trading sessions, the semiconductor index has declined roughly 12%, reflecting growing caution among investors toward high-valued technology stocks that have driven much of the market’s gains over the past year.

The selloff comes as entrepreneur Elon Musk prepares for the highly anticipated initial public offering of SpaceX next week, with reports suggesting a potential valuation of $1.75 trillion.

Despite Friday’s sharp decline, the semiconductor index remains up 73% for the year after reaching a record high earlier this week.

NVIDIA, the world’s most valuable chipmaker, saw its shares fall nearly 6%, erasing more than $300 billion from its market capitalization. Micron Technology dropped 13%, resulting in an estimated $150 billion loss in market value.

Meanwhile, Marvell Technology, one of investors’ favorite AI-related stocks in recent months, plunged 17%, while AMD shares fell nearly 11%.

Market analysts said the decline reflects a shift in investor sentiment after months of aggressive buying in AI-related stocks.

According to trader Dennis Dick, many investors had become accustomed to buying every market dip without closely analyzing company fundamentals.

“Buying the dip has worked for a long time, but today that strategy failed,” he said.

Beyond the semiconductor sector, stronger-than-expected U.S. employment data also fueled concerns that interest rates could remain elevated for longer than previously anticipated. Those worries weighed on the broader market, with the S&P 500 falling 2.6%.

Broadcom, widely viewed as one of the major beneficiaries of the AI investment boom, lost another 7.9% on Friday, bringing its two-day decline to nearly 20%.

Ohsung Kwon said semiconductor stocks had risen too far, too quickly, making a pullback inevitable.

“Valuations in the semiconductor sector had become extremely stretched, so some profit-taking was expected,” Kwon said. “However, I do not believe this marks the end of the long-term bull market for semiconductor stocks.”