Chip Stocks Lost $2 Trillion in 8 Days, Testing Investor Faith in the AI Boom
Chip stocks erased about $2 trillion in eight sessions, their longest losing streak since 2008, as high yields and doubts about AI spending returns weighed on the sector.
The Philadelphia Semiconductor Index, a benchmark of US-listed chipmakers, bounced on Monday after its longest losing streak since 2008. However, CNBC's Investment Committee panel split on whether that marks a buying opportunity or a pause in a larger unwinding of chip stocks.
The index fell more than 11% last week, capping eight consecutive losing sessions. This selloff coincided with an inflation reading above forecasts, which raised the odds of Federal Reserve rate hikes. Minutes from the Fed's September meeting showed most officials saw another 2026 rate hike as likely appropriate.
At Monday's open, the 10-year Treasury yield stood at 5.10%, according to Schwab data. High yields have particularly pressured neoclouds—debt-funded firms that rent out AI computing power—with one panelist noting yields 0.5 to 0.75 percentage points lower would ease that stress.
AI Spending Timeline Disputed
Panelists disagreed on when AI spending will peak, with estimates ranging from one year to four years away. One analyst pointed to memory chipmaker Micron's share buybacks and take-or-pay contracts, under which customers pay for chips regardless of usage, as evidence of sustained demand.
Such contracts would offer little protection once spending peaks, as in past cycles.
Another panelist welcomed hedge funds trimming chip exposure, noting that November and December are seasonally favorable for stocks. However, a skeptic observed that last week's market breadth favored healthcare and energy rather than industrials such as Caterpillar.
Earnings as Key Test
Upcoming earnings reports will provide the next critical test for AI-linked stocks. Lam Research, a chipmaking equipment supplier, reports this week alongside Texas Instruments, Western Digital, Meta, Tesla and SpaceX.
With the 10-year yield above 5%, investors are judging each AI earnings report against the cost of money. Returns on AI spending have become the key metric, not just assurances that spending will continue. This standard applies to every AI-related stock, from chipmakers to the Magnificent Seven—the group of largest US tech companies.
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