Aptus Capital's Wagner says buy semis after 20% pullback

The Philadelphia Semiconductor Index's 20% decline over the past month was driven by a positioning unwind rather than weakening AI fundamentals, Aptus Capital Advisors' David Wagner said.

"Investors should treat this pullback as an opportunity to add equity exposure, not a reason to flee to fixed income," Wagner, a portfolio manager at the firm, said. "The AI investment thesis remains intact — what we're seeing is a technical correction in positioning after an extended rally."

The semiconductor benchmark fell about 4.3% in Thursday's session alone, bringing its five-session decline to roughly 7.1%. The broader Nasdaq Composite dropped 1.5% on Thursday and is down 2.9% over the past month. The selloff has coincided with a surge in bearish bets: short positions across U.S. and Canadian equities rose 4% in June to $2.39 trillion, a record in data going back to 2010, S3 Partners data shows. Short interest for the median S&P 500 stock has climbed to 3.2% of market capitalization, the highest level since the 2008 financial crisis, according to Goldman Sachs.

For investors, the question is whether the AI-driven bull market can sustain its momentum after a nearly four-year run. Wagner argues it can, recommending investors stay overweight equities and underweight fixed income while using volatility as a portfolio tool. The CBOE Volatility Index rose 9.56% in a single session and has surged 14.13% over the past five trading sessions, reflecting growing investor anxiety. The U.S. 10-year Treasury yield has also drawn attention as investors reassess rate expectations against an AI-driven inflation backdrop.

Memory stocks showed early signs of stabilization Monday, with Micron Technology gaining 5% to $887.35 and SanDisk rising 6% to $1,435.70. The bounce followed a punishing stretch that dragged the broader semiconductor complex into oversold territory. JPMorgan strategist Mislav Matejka told clients the sector "will find a floor soon," pointing to the absence of meaningful supply additions before 2028 as a structural support for chip margins.

The pullback has been broad-based. Intel, which reports second-quarter results this week, has declined about 27% over the past month as investors weigh competitive pressures against the company's AI-driven turnaround. The chipmaker is expected to post healthy revenue growth supported by resilient demand for its server processors, though profit-taking after a strong rally earlier this year has weighed on the stock.

Wagner's call to overweight equities runs counter to the defensive positioning many investors have adopted as AI-driven inflation fears and geopolitical risks mount. Goldman Sachs has warned that rapid AI adoption could add roughly 20 basis points annually to U.S. core PCE inflation, a figure expected to more than double to 50 basis points by year-end as supply constraints persist. Escalating tensions in the Strait of Hormuz have pushed both WTI and Brent crude up about 11.8% over the past five trading sessions, adding to inflation concerns.

"Volatility is not something to hide from — it's something to use," Wagner said. "If you're underweight equities right now because you're scared of a 20% drawdown in one sector, you're likely missing the bigger picture."

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