Philadelphia Semiconductor Index plunges 7% as chip stocks sell off

The Philadelphia Semiconductor Index suffered its worst session in over a year, falling 7% Friday as a broad selloff swept across chipmakers from Nvidia to TSMC.

A wave of selling engulfed the semiconductor sector Friday, sending the Philadelphia Semiconductor Index down 7% as investors fled chip stocks on concerns that AI-driven demand may be cooling after months of breakneck gains.

"The market is repricing the AI trade in real time — what was priced for perfection now faces scrutiny on returns," said Dean Chen, analyst at Bitunix.

The selloff hit every corner of the sector. Advanced Micro Devices fell 8.6%, Micron Technology dropped 8.3%, and Broadcom lost 6.2%. Nvidia, the bellwether of the AI chip boom, declined 4.7%, while Taiwan Semiconductor Manufacturing Co. slid 5.2%. ASML Holding, the Dutch supplier of lithography machines essential for advanced chip production, fell 4.6%. The declines came after a volatile week that saw the Dow Jones Industrial Average hit a record on Thursday while tech stocks lagged.

The 7% drop in the SOX erased roughly $400 billion in market value from the sector. The selloff raises questions about whether the AI infrastructure spending cycle, which has driven the Nasdaq to repeated records this year, is entering a more cautious phase after Alphabet announced an $80 billion stock sale this week to fund data center investments.

The week's tech weakness began Thursday when Broadcom shares tumbled 13% despite reporting quarterly results that topped Wall Street estimates. The chipmaker's fiscal second-quarter revenue and earnings beat consensus, and it forecast third-quarter revenue of $29.4 billion — representing roughly 84% year-over-year growth. But investors, who had driven the stock up about 20% year-to-date ahead of the report, sold on the news after Broadcom declined to raise its long-term AI revenue target beyond the $100 billion forecast for next year.

Micron Technology, which had nearly quadrupled in value this year through Wednesday on surging demand for high-bandwidth memory used in AI data centers, fell 8.3% Friday. Morgan Stanley analysts had warned earlier this week that while the memory shortage could last two to three years, the stocks had already blown past their price targets. Sandisk, the other memory standout that had soared 670% this year, also retreated.

The selloff extended beyond individual stocks to the broader semiconductor supply chain. ASML, whose extreme ultraviolet lithography machines are required to manufacture the most advanced chips at TSMC and Samsung, fell 4.6%. The Dutch company's stock had more than doubled over the past 12 months as chipmakers raced to expand capacity.

Nvidia shares, trading at roughly 35 times forward earnings, have given back some of their 2026 gains but remain up more than 40% year-to-date. The broader question for investors is whether this week's selloff represents a healthy pullback in an overheated sector or the beginning of a more sustained rotation out of AI hardware. Alphabet's $80 billion stock sale to fund AI data centers, announced Monday, has added to concerns that even the largest tech companies are straining to finance the infrastructure buildout.

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