Chip stocks tumbled on Tuesday as investors booked profits following Samsung Electronics' nearly 7% decline in Seoul, despite the company reporting second-quarter operating profit expected to rise 19-fold to 89.4 trillion won and revenue up 129% to 171 trillion won. The selloff was triggered by profit-taking after red-hot rallies in the semiconductor sector, with Intel dropping 9.7% to become the biggest loser in the S&P 500 index. The retreat extends a multi-day downturn in chip stocks, raising concerns among investors that the AI-driven rally may be losing momentum as valuations reach elevated levels.
Samsung Reports 19-Fold Profit Surge, Shares Drop 7%
Samsung said its second-quarter operating profit is expected to rise 19-fold to 89.4 trillion won ($58.44 billion), and revenue to increase 129% to 171 trillion won—above analysts' expectations on both counts. Despite the blowout preliminary results, Samsung shares in Seoul tumbled nearly 7% on Tuesday, pulling down rival SK Hynix and the broader Kospi, where the two tech giants carry significant weight.
Intel Leads S&P 500 Declines With 9.7% Drop
Intel stock dropped 9.7%, its steepest one-day drop in a month, to emerge as the biggest loser in the S&P 500 on Tuesday, while rival Advanced Micro Devices' shares plunged 6.5%. Memory chip stocks Western Digital and SanDisk shed over 7% each, while Micron declined 4.7%. Shares of chip-making equipment firms KLA Corp and LAM Research also dropped around 7% each. Curiously, the Nvidia stock, which has underperformed lately, ended 0.7% higher.
Semiconductor Stocks Fall Below 50-Day Moving Average
Tuesday's selloff is notable because major chip stocks had already been retreating for several days, raising concerns among investors that the AI trade may be losing steam and that a broader downturn could be underway. Semiconductor stocks continue to dip further below their 50-day moving average. There are not many catalysts behind the pullback, although concerns about elevated valuations have been building in the background. Intel stock has tripled this year, while AMD is up 141% and SanDisk has risen a staggering 582%. The AI-driven rally has boosted shares of several smaller players, such as Marvell Technologies, LAM Research, and Nebius.
Analysts Maintain Bullish Outlook on AI Infrastructure Demand
"The AI trade is intact. Structurally nothing has changed," Daniel Newman, CEO of The Futurum Group said in an X post. "A little profit taking on memory and infra names is healthy after these parabolic moves. It's still very early and demand still well outstrips supply." On Stocktwits, the retail sentiment was 'bullish' for MU, 'neutral' for INTC and SNDK, and 'bearish' for AMD and WDC. The sentiment was 'bullish' for the iShares Semiconductor ETF (SOXX) and the Roundhill Memory ETF (DRAM). "$DRAM $MU $NBIS and other AI hardware stocks like $INTC will bounce back after a successful launch of SK Hynix ADR," a trader wrote, referring to SK Hynix's Nasdaq debut due on Friday.
FAQ
Why did chip stocks drop on Tuesday despite Samsung's strong earnings?
Investors booked profits after red-hot rallies in the semiconductor sector, with Samsung shares tumbling nearly 7% in Seoul despite reporting second-quarter operating profit expected to rise 19-fold to 89.4 trillion won and revenue up 129% to 171 trillion won.
What was Intel's stock performance on Tuesday?
Intel stock dropped 9.7%, its steepest one-day drop in a month, making it the biggest loser in the S&P 500 index on Tuesday.
What concerns are investors expressing about the chip stock selloff?
Major chip stocks had already been retreating for several days before Tuesday's selloff, raising concerns among investors that the AI trade may be losing steam and that a broader downturn could be underway, with semiconductor stocks continuing to dip further below their 50-day moving average.
