After a remarkable second quarter where chip stocks collectively added $2 trillion in value, the sector opened the third quarter with notable losses. Micron Technology saw an 11% drop, erasing $138 billion in market capitalization, while Intel and Advanced Micro Devices fell 9% and 7%, respectively.
This downturn followed a period of optimism driven by expectations that the artificial intelligence (AI) boom would increase demand for memory and processing power. The VanEck Semiconductor ETF, which tracks chip stocks, also declined over 5%, despite having its best quarter ever with a 71% increase from April to June.
The decline was exacerbated by news that Meta, a major AI infrastructure buyer, might rent out excess computing capacity, suggesting that supply could soon meet or exceed demand. This development negatively impacted investor sentiment towards semiconductor equipment companies like Lam Research, KLA Corp., and Applied Materials, all of which saw declines of at least 10%.
Despite these market pressures, Micron reported a significant increase in revenue and gross margin, indicating strong financial performance that contrasts with the stock's recent price drop.
Analysts remain optimistic about the long-term potential of hyperscalers like Meta, which are investing heavily in AI infrastructure, although concerns about valuation persist as earnings accelerate while stock multiples compress