Why chip stocks are headed for more volatility after hitting a rough patch
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- Philadelphia Semiconductor Index (SOX) has shed more than 11% since hitting a record high in June, though it is still up 83% year-to-date as investors weigh stretched valuations against the durability of the AI capex boom.
- Chip-stock funds recorded roughly US$11-billion in outflows in the week ended June 24 — the largest weekly outflow this century, according to LSEG Lipper data — after pulling in about US$12-billion the prior two weeks.
- BofA Securities projects global cloud and AI infrastructure capital expenditure will approach US$1.5-trillion by 2027, a 40-to-50-per-cent year-over-year jump that underpins broker bullishness.
- SK Hynix jumped more than 10% in its U.S. trading debut following a US$26.5-billion share sale, as soaring memory prices tighten supply for Micron, Sandisk, and Nvidia.
- Short interest in major semiconductor companies is at a three-year high and has nearly doubled on average over the past three years, per ORTEX, with bets against Marvell, Qualcomm, and Micron rising the most.
- Nvidia trades at a forward price-to-earnings ratio of about 19 — its lowest in more than 10 years — while Intel, AMD, and Marvell trade above their longer-term averages, flagging a valuation split across the sector.
- Earnings for the S&P 1500 Semiconductors & Equipment Industry index are expected to more than double this year but moderate to 46.1% growth in 2027, according to LSEG-compiled data.
Why it matters: Chip stocks are splitting into two camps: AI-heavy leaders like Nvidia and Micron look cheaper on forward earnings (P/Es near decade lows) even as the broader SOX index gives back gains, while Intel, AMD, and Marvell trade above their historical multiples — a valuation gap that will determine who gets rewarded and who gets punished when earnings land in a moderating 2027.
