Semiconductor stocks tumble 4.1% as memory chip rout deepens

US semiconductor stocks suffered their worst session in three weeks on Thursday, with the PHLX Semiconductor Index dropping 4.1% as memory chip makers plunged on demand concerns.

The selloff was broad-based, with all 30 components of the PHLX index declining. Memory chip stocks were hit hardest: the US memory chip index fell more than 6.4%, with Sandisk dropping 9.4%, Micron Technology falling 6.6%, Western Digital sliding 5.8% and Seagate Technology losing 4.9%, according to market data.

Other semiconductor names saw even steeper declines. Credo Technology plunged 10%, Astera Labs fell 9.3%, Coherent dropped 8.8% and Marvell Technology declined 7%. Nvidia, the sector's largest company by market capitalization, fell a relatively modest 0.3%, making it the best performer among major chip stocks on the day. The Nasdaq 100 Index declined 1.2%.

Thursday's losses deepen what has become a brutal July for semiconductor stocks. The PHLX Semiconductor Index has now fallen more than 22% this month, after doubling during the first six months of 2026, according to LSEG data. Nineteen large-cap semiconductor and related stocks have posted July declines of at least 25%, led by Sandisk's 40.4% drop, Corning's 39.5% decline and Astera Labs' 37.1% slide.

Memory Chip Rout Accelerates

The memory chip segment has been the epicenter of July's semiconductor selloff. Sandisk, which had surged 471% year-to-date through June, has seen its forward price-to-earnings ratio compress to 6.4 from 13.6 at the end of 2025, as earnings estimates rose faster than the stock price. Micron Technology, up 197% for the year, has fallen 26.5% in July alone. Western Digital has declined 25.3% this month despite a 177% year-to-date gain, per LSEG data.

The rotation out of semiconductor stocks comes after a historic first-half rally driven by artificial intelligence spending. The iShares Semiconductor ETF (SOXX) now trades at a forward P/E of 22.8, roughly in line with the S&P 500's forward P/E of 20.3, after trading at a significant premium earlier this year.

What's Driving the Selloff

The broad-based nature of the decline — affecting memory, analog, networking and equipment stocks alike — suggests a sector-wide reassessment rather than company-specific issues. Equipment makers have been particularly hard hit: KLA Corp fell 29.5% in July, Lam Research dropped 27.7% and Applied Materials declined 26.7%, according to LSEG data. These companies, which supply the tools used to manufacture chips, are often viewed as bellwethers for future production demand.

Intel, which has surged 158% year-to-date after optimism about its foundry business, has fallen 31.9% in July. The company is scheduled to report earnings Thursday after the closing bell, with options pricing implying a potential 12% swing in either direction.

Investment Impact

For investors, the semiconductor selloff presents a valuation question. After doubling in the first half of 2026, the sector's forward multiples have compressed sharply — but earnings estimates have also been rising, creating a moving target. The divergence between Nvidia's 0.3% decline on Thursday and the 7% to 10% drops across memory and networking chipmakers suggests capital is rotating within the sector rather than abandoning it entirely.

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