Key Takeaways:
The Philadelphia Semiconductor Index opened down 3.6% on Aug. 18, with Micron Technology falling 4.57% and AMD dropping 3.15%.
The decline extended a pullback in chip stocks after research firm SemiAnalysis reported that Alphabet is shifting custom AI processor orders toward AMD and MediaTek, a move that knocked Broadcom shares down nearly 6% on Friday. Nvidia fell 2.21%, Taiwan Semiconductor Manufacturing dropped 2.88%, Broadcom slipped 1.8% and ASML declined 3.41%.
The losses compounded a July slide in memory-chip names, when SanDisk and Micron each tumbled 47% and 29% as investors took profits after a stellar run and fretted about sky-high valuations. Both stocks have since regained ground as traders bet they will be major beneficiaries of the AI infrastructure buildout, with Micron trading at $1,028.47.
The selloff shows how heavily the AI trade has concentrated in a handful of chipmakers trading at elevated multiples after a year-long rally. Broadcom, down 8.13% in the past week, still trades at $392.99 after fiscal second-quarter revenue rose 48% to $22.2 billion, with AI semiconductor revenue up 143% to $10.8 billion. TSMC, up 41% year to date to $426.35, lifted its full-year growth forecast to above 40% and raised 2026 capital spending to $60 billion to $64 billion.
The divergence between the two names captures the tension in the sector. Broadcom's slide reflects concern that Alphabet, its largest custom-silicon customer, is diversifying suppliers, even though the company's own guidance calls for AI revenue to exceed $100 billion in fiscal 2027. TSMC, by contrast, benefits from the same buildout without the customer-concentration risk, with high-performance computing now 66% of its platform mix.
Memory-chip makers have been among the biggest winners of the AI buildout, and the July pullback in SanDisk and Micron came after a stellar run that left both trading at elevated valuations. The recovery since then shows investors still expect data-center spending to keep rising, even as they rotate among the names best positioned to capture it. Micron's 4.57% drop on Monday was the steepest among the SOX's largest constituents, a sign that profit-taking in the group has yet to run its course.
Investors are weighing whether the pullback is a buying opportunity or the start of a broader de-rating. Alphabet's reported diversification of TPU suppliers suggests the custom-silicon pie is expanding even as individual vendors lose share, and Broadcom signed a renewed five-year partnership with Google. Memory-chip names have recovered some ground since July, though the sector's dependence on a handful of hyperscaler customers leaves it exposed to any slowdown in AI capital spending.
This article is for informational purposes only and does not constitute investment advice.
