A brutal July sell-off in AI chip shares has caught out many retail investors. Whether prices return to their highs is the loudest question.
Mark Zuckerberg did not buy or sell a single chip, yet on July 1 his company set off the sharpest fall in semiconductor shares in years. Bloomberg reported that day that Meta planned to rent out spare computing power to other firms through a new arm, Meta Compute. Mike Intrator’s CoreWeave, which does little else, fell almost 14 per cent the next session; Nebius, a rival, dropped 17 per cent. The Philadelphia Semiconductor Index, which tracks the firms that make the chips, lost 6.7 per cent on July 2, its worst day since the market steadied after the pandemic.
Micron, the largest American maker of memory chips, fell 13 per cent in a single session. Intel, in the middle of a restructuring that Lip-Bu Tan has run since March 2025 and that will shed more than 20,000 jobs, lost 21 per cent over seven trading days. Applied Materials gave back about 10 per cent, AMD seven or eight. By mid-July the semiconductor index had surrendered more than a fifth of the value it reached only in June, wiping out over one trillion dollars. The selling crossed the Pacific within the week: in Seoul the Kospi fell 10 per cent intraday, tripping circuit breakers, as Samsung and SK Hynix each fell by up to 12 per cent.
Jensen Huang, Nvidia’s chief executive, was in Tokyo on July 16 when Taiwan Semiconductor Manufacturing Company (TSMC) reported results that beat forecasts and still spooked the market. The Taiwanese firm said it would spend more on new plant than it had promised, and its shares fell more than three per cent; Nvidia dropped 2.2 per cent alongside them. Samsung had already shown the pattern. It reported quarterly operating profit up more than 1,800 per cent from a year earlier, about 58 billion dollars, and its shares closed nearly seven per cent lower on the day.
Going it alone
The deeper problem is that Nvidia’s biggest customers have begun designing their own chips. On July 8 Andrew Feldman’s Cerebras, which makes dinner-plate-sized processors, said it would develop one with OpenAI aimed squarely at the graphics processing units (GPUs) that Nvidia sells. Amazon had been shipping its own accelerators for months. ASML, which makes the machines that print chips, raised its guidance on July 15th and then disclosed a record order backlog, a hint that new capacity was being built faster than buyers could absorb it.
Kevin Warsh, who took over the Federal Reserve in May, gave the impatient no comfort. At his first meeting he signalled that rates would stay higher for longer, which punishes firms whose profits sit far in the future. Money duly rotated. It left the capital-hungry chip suppliers for the megacaps that spend the money and the Chinese names that had lagged; Alibaba climbed about 17 per cent from its late-June low. On July 7 the semiconductor index fell 5.1 per cent even as the Dow Jones Industrial Average closed above 53,000 for the first time.
Nvidia, the first company worth five trillion dollars, is the most widely held stock on Robinhood, the app favoured by small investors, having pushed Tesla off the top spot earlier this year. Many of them had bought near the peak. The shrewder money had been leaving for a while: Philippe Laffont’s Coatue Management spent months paring its Nvidia stake, and Michael Burry, of “Big Short” fame, was by now short Micron.
Joseph Moore, an analyst at Morgan Stanley, called the rout a buying opportunity in a note on July 20, arguing that the memory used in data centres would stay under-supplied into 2027. Bank of America reckoned the same shares could rise by two-thirds. The optimists had recent form: earlier in 2026 a cautious update from Broadcom wiped more than a trillion dollars from the sector in days, and the stocks snapped back within weeks.
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