Last week, the VanEck Semiconductor ETF (SMH) experienced an 8.9% drop, marking its largest weekly decline since April 2025, while the Philadelphia SE Semiconductor Index (SOX) fell nearly 10%. Analysts, however, remain optimistic about the sector's fundamentals, particularly in hardware and infrastructure, citing ongoing capital expenditures and a persistent memory chip bottleneck.
Vijay Rakesh from Mizuho noted that demand for semiconductors, driven by AI capital expenditures and power installations, is expected to continue growing significantly beyond 2028-2029. Joseph Moore at Morgan Stanley described the recent sell-off in memory stocks as a compelling entry point, highlighting Nvidia (NVDA) and Broadcom (AVGO) as particularly valuable.
JP Morgan's Mislav Matejka expressed confidence that semiconductor stocks will soon rebound, given that significant supply increases are not anticipated before 2028. Conversely, Evercore's Mark Lipacis cautioned that the SOX may decline further before recovering, predicting a potential additional drop of 10%-15% over the next few weeks.
The release of Moonshot AI's Kimi K3, an advanced AI model, has raised concerns in the tech sector, but analysts believe that consolidation in AI software will not negatively impact hardware demand. Peter Fenton from Benchmark emphasized the competitive landscape for computing power, suggesting that the demand for high-performance, cost-effective solutions will drive the market forward