Chipmakers and other high-flying stocks slide as AI trade wobbles

• The Philadelphia SE Semiconductor Index is on pace for its largest one-week decline since March 2025, down 11% this week and nearly 24% from its all-time high in late June
• Major chip stocks declined sharply: Nvidia fell 3%, while Micron, SanDisk, Qualcomm, and Broadcom each dropped 2-3% as investors questioned AI capital expenditure sustainability
• Chinese startup DeepSeek's launch of the Kimi K3 model (a 2.8 trillion-parameter AI system) and Google's delayed Gemini 3.5 Pro release intensified scrutiny of returns on U.S. tech companies' hefty AI investments

Chipmakers Face Steep Decline as AI Trade Momentum Falters

Semiconductor stocks are experiencing their sharpest weekly decline in over a year as investors rotate out of AI-driven winners. The Philadelphia SE Semiconductor Index has dropped 11% this week—its largest one-week fall since March 2025—and is down nearly 24% from its late June all-time high, approaching bear market territory.

Key Performers:

Major chip stocks declined Friday, with Nvidia down 3%, Qualcomm and Broadcom losing approximately 2% each, and memory chip manufacturers Micron and SanDisk falling around 3%. SpaceX dropped 4%, while SK Hynix's U.S.-listed shares fell 2.7%.

Market Context:

Despite the recent selloff, the chip index remains up nearly 62% year-to-date. The S&P 500 Momentum Index has pulled back 10% in July, significantly underperforming after outpacing the broader S&P 500 by more than 2:1 this year.

Driving Factors:

Analysts attribute the reversal to profit-taking and mounting concerns over AI capital expenditure sustainability. Toni Meadows of BRI Wealth Management notes that semiconductor valuations had "priced near-perfect demand" in a historically cyclical sector. Additional pressure came from China's DeepSeek launching its 2.8 trillion-parameter Kimi K3 model and reports of delays in Alphabet's Gemini 3.5 Pro release.

Global Impact:

The volatility has spread internationally, with South Korea's KOSPI confirming a bear market (despite being up 70% for the year), Japan's Nikkei entering correction territory, and Europe's tech sector ranking among top weekly losers.

Investor focus now shifts to upcoming earnings from Alphabet and Tesla, two members of the "Magnificent Seven" tech giants.