Shares of US chipmakers fell sharply at the close of trading on Tuesday, erasing much of the previous session's gains, as selling pressure mounted on shares of memory and AI-related chip companies, coinciding with a decline in trading volumes during mid-August.
The Philadelphia Semiconductor Index fell 5%, after rising about 1.6% in Monday's session, in a clear reversal of the direction of trading within a single session.
Shares of memory chip companies led the losses, with Micron shares falling 7% to $940.76, SanDisk shares dropping 9% to $1,625.78, and SK Hynix shares declining by about 9.2% to $155.62.
The sell-off extended to AI-related semiconductor companies, with Nvidia shares falling 2.3% to $219.74, AMD shares dropping 4.3% to $484.39, and Broadcom shares declining 3.2% to $380.
Network chip companies saw even steeper losses, with Coherent shares falling 12.8% and Credo Technology shares declining by about 13%, reflecting the widening scope of selling pressure within the semiconductor sector.
Jordan Klein, a trading analyst at Mizuho Securities, believes that the sharp movements seen in the sector's stocks may be partly related to automated trading, especially given the lower-than-usual trading volumes during mid-August.
Weak liquidity in the markets increases the sensitivity of stocks to large buying and selling movements, which may explain the sharp declines seen in some chip stocks despite the absence of any necessarily fundamental change in the companies' operating fundamentals.
This decline comes after a strong rally in artificial intelligence and semiconductor stocks in the past period, driven by expectations of continued massive spending on artificial intelligence infrastructure and increased demand for advanced chips and server memory.
The sector's stocks remain under close scrutiny by investors, especially given the high valuations of many companies, making them more vulnerable to profit-taking and sharp movements when liquidity declines or the market's risk appetite changes.
