High-flying chip stocks tumbled on Tuesday as investors took profits, tracking the selloff in Samsung Electronics shares despite the company’s blowout preliminary results.
Samsung said its second-quarter operating profit is to rise 19-fold to 89.4 trillion won ($58.44 billion), and revenue to increase 129% to 171 trillion won – above analysts’ expectations on both counts.
Still, Samsung shares in Seoul tumbled nearly 7% on Tuesday, pulling down rival SK Hynix and the broader Kospi, where the two tech giants carry significant weight.
Chip Stocks Retreat
In the U.S., dropped 9.7%, its steepest one-day drop in a month, to emerge as the biggest loser in the S&P 500 on Tuesday, while rival Advanced Micro Devices’ shares plunged 6.5%.
Memory chip stocks Western Digital and SanDisk shed over 7% each, while Micron declined 4.7%. Shares of chip-making equipment firms KLA Corp and LAM Research also dropped around 7% each. Curiously, the Nvidia stock, which has underperformed lately, ended 0.7% higher.
Tuesday’s selloff is also notable because major chip stocks had already been retreating for several days, raising concerns among investors that the AI trade may be losing steam and that a broader downturn could be underway.
Semiconductor stocks continue to dip further below their 50-day moving average. (see chart).
There are not many catalysts behind the pullback, although concerns about elevated valuations have been building in the background. Intel stock has tripled this year, while AMD is up 141% and SanDisk has risen a staggering 582%. The AI-driven rally has boosted shares of several smaller players, such as Marvell Technologies, LAM Research, and Nebius.
Analyst, Retail View On Chip Stocks
“The AI trade is intact. Structurally nothing has changed,” Daniel Newman, CEO of The Futurum Group said in an X post. “A little profit taking on memory and infra names is healthy after these parabolic moves. It’s still very early and demand still well outstrips supply.”
On Stocktwits, the retail sentiment was ‘bullish’ for MU, ‘neutral’ for INTC and SNDK, and ‘bearish’ for AMD and WDC. The sentiment was ‘bullish’ for the iShares Semiconductor ETF (SOXX) and the Roundhill Memory ETF (DRAM).
“$DRAM $MU $NBIS and other AI hardware stocks like $INTC will bounce back after a successful launch of SK Hynix ADR,” a trader , referring to SK Hynix’s Nasdaq debut due on Friday.