Global chip stocks tumble as H2 begins, Kioxia drops 13.5%

Global semiconductor stocks suffered their worst single-day selloff in months as the second half of 2026 opened, with Japan's Kioxia plunging 13.5%.

Global semiconductor stocks suffered a broad selloff to start the second half of 2026, with Japan's Kioxia tumbling 13.5%, as investors rotated out of high-flying chip names ahead of the U.S. jobs report.

"The risk of an air pocket for stocks is real as the market shifts focus from AI hype to monetization," Mohamed El-Erian, chief economic adviser at Allianz, said. Apollo Global Management's chief economist separately warned that returns on AI investment are likely confined to the tech sector, pointing to a "slower cash flow reality."

The selloff extended across Asia, Europe, and the US. Kioxia, Japan's most valuable company, fell 13.5%, while South Korea's SK Hynix — planning a $29.4 billion Nasdaq listing — also declined. The weakness followed a record first half for the Philadelphia Stock Exchange Semiconductor Index, which posted its best-ever return. The S&P 500 and Nasdaq 100 each recorded their best quarterly performances since 2020, with the SOX index leading the charge on AI-driven demand for high-bandwidth memory and advanced logic chips manufactured on TSMC's 3nm and 5nm nodes.

The pullback threatens to unwind some of the AI-driven gains that propelled chip stocks to historic highs. With the U.S. jobs report due July 2, a weak reading could accelerate the selloff, while a strong print might stem the losses. The rotation out of semiconductors into other sectors suggests investors are questioning whether AI infrastructure spending can sustain its current pace.

While chip stocks sold off, other technology names showed resilience. Meta Platforms surged on its AI-cloud bet, and the Dow Jones Industrial Average hit a record, showing the selective nature of the rotation. In India, Infosys jumped 5%, snapping a four-day losing streak for the Nifty IT index, as investors sought value in beaten-down tech services names. The divergence between hardware and software names reflects a market beginning to differentiate between AI infrastructure builders and AI application beneficiaries.

The selloff comes after a period of extraordinary gains. Micron Technology last week crushed Wall Street earnings estimates and gave solid guidance, briefly restoring confidence in the semiconductor cycle before the broader pullback resumed. Bank of America had warned that the S&P 500 could drop as much as 6% in the third quarter in a worst-case scenario, with tech stocks most exposed to a valuation correction. The chip sector's high beta to any growth scare makes it particularly vulnerable to the jobs report outcome.

The supply chain implications are significant. TSMC, which manufactures chips for Nvidia, AMD, and Apple on its advanced nodes, faces potential order adjustments if customers trim their near-term forecasts. Any slowdown in AI chip orders would ripple through the packaging ecosystem, affecting companies like ASE Technology and Amkor that handle CoWoS advanced packaging for AI accelerators. The semiconductor equipment sector, including ASML and Applied Materials, would also feel the impact if chipmakers reduce capacity expansion plans.

For investors, the selloff creates a valuation reset opportunity, but near-term volatility remains elevated. Nvidia, which reports next month, will be the key bellwether. If its data center revenue continues to beat estimates, the current pullback may prove to be a buying opportunity. If guidance disappoints, the rotation out of semiconductors could deepen. The SOX index's record first-half run has left little room for error, and any sign of slowing AI capital expenditure could trigger a more sustained correction. Morgan Stanley had previously highlighted the risk of a "digestion period" for AI infrastructure spending as hyperscalers reassess their return on investment.

This article is for informational purposes only and does not constitute investment advice.