CHIP RALLY MEETS A REALITY CHECK AS KEY SUPPORT LEVELS COME INTO VIEW
U.S. semiconductor stocks are under pressure in premarket trading after Samsung Electronics' latest results reignited concerns about the AI trade. While the South Korean memory-chip maker reported a 19-fold increase in operating profit, investors appear more focused on whether the pace of spending tied to the AI boom can be maintained.
The Invesco PHLX Semiconductor ETF NASDAQ:SOXQ is down about 4% before Tuesday's opening bell, pointing to another rough session for the PHLX Semiconductor Index NASDAQ:SOX. The weakness comes after an extraordinary run for the group. Through the end of June, the SOX had surged 101% over the previous six months, its strongest first-half performance on record in LSEG data going back to 1994.
Since then, however, momentum has faded. The index closed Monday at 12,900, about 12% below its June 22 record close and roughly 9.5% lower for July so far. If Tuesday's projected opening losses hold, the SOX would be on track for its biggest monthly decline since September 2022, when it fell 13.8%.
With volatility elevated, investors are watching key technical levels for signs of support. The 10-week moving average sits near 12,700, while a previously broken weekly channel line—now acting as support—comes in around 12,465.
Those levels could prove important. A bounce from support would help preserve the longer-term uptrend. But a move back inside the former trading channel could signal that a more meaningful trend shift is under way. The June low was 11,794. Further down, the rising 40-week moving average, which helped contain earlier pullbacks this year, is near 8,980.
Within the sector, chipmakers have recently outperformed equipment manufacturers after rebounding from a late-June low. Even so, the chipmaker-to-equipment-maker ratio remains below both its declining 20-day moving average and its 50-day moving average.
Until that ratio breaks back above these closely watched trend indicators, chipmakers may continue to lag equipment makers despite periodic rallies.