Semiconductor stocks fell for a sixth straight session as AI bubble fears and rising oil prices dragged on markets, even as analysts and commentators point to strong underlying chip demand heading into a critical stretch of earnings and inflation data.
The VanEck Semiconductor ETF fell 7.2% over six consecutive trading sessions through Tuesday, as growing concerns about an AI spending bubble and competitive pressures from China weighed on chipmakers across the board.
The broader market felt the strain as well. The S&P 500 and Nasdaq-100 each closed lower for a second straight session on Tuesday, with futures dipping 0.03% and 0.1%, respectively, Tuesday night as traders positioned ahead of September's consumer price index report.
Economists polled by Dow Jones expect inflation to have risen 3.6% year over year in September, up from 3.4% in the prior reading. The data arrives as gasoline averages $4.34 a gallon nationally, compared with $3.08 per gallon a year earlier, according to AAA. President Donald Trump last week announced a temporary easing of restrictions on Russian diesel fuel exports, though analysts say the move is unlikely to meaningfully lower fuel costs for truckers and farmers.
Chip stocks have been dragging on the major indexes even as the underlying demand case remains widely acknowledged. "The business fundamentals are very strong. It's very hard to argue with the demand side of the story for chips," Marta Norton, chief investment strategist at Empower, told CNBC's "Closing Bell: Overtime." "I don't know if we necessarily question how good those business fundamentals are as much as we question how much valuation is left in the space."
S&P 500 companies are expected to post a blended earnings growth rate of roughly 30% for the third quarter, while semiconductors and semiconductor equipment are projected to deliver growth of 130%, according to FactSet data — the largest year-over-year contributor in the index.
Despite the sell-off, "Mad Money" host Jim Cramer urged investors not to abandon the sector entirely. He pointed to memory chip maker Micron, highlighting its 26 long-term customer agreements, which currently cover about 35% of revenue through 2030, with negotiations already underway for 2031. Those take-or-pay contracts require customers to honor their financial commitments regardless of market conditions.
"If Micron had no agreements I would be worried," Cramer said. He also cited Intel and AMD, describing them as companies that "make the CPUs that are basic building blocks for practically every machine under the sun."
Cramer acknowledged the sector could see further losses after an extended run. "It's reasonable to expect a sharp pullback after how far these stocks traveled," he said. "I just think that when you see the devices, when you know the exploding use cases, you can understand why Micron or Intel or AMD have been moving up."
Elsewhere in markets Tuesday, a swath of major banks reported strong third-quarter results but still saw their shares fall, underscoring the elevated bar investors have set heading into earnings season. Bank of America shares dropped more than 2% in extended trading after regulators hit the bank with more than $1.2 billion in federal penalties. Regulators said the nation's second-largest bank failed for years to report more than $5 billion in suspicious transactions and address longstanding anti-money-laundering deficiencies. More than $1 billion of the unreported activity involved national security and other high-priority risks, including Chinese money-laundering networks and activity tied to the southwest border, the Treasury Department said in a press release. Goldman Sachs and Citigroup also ended the session lower despite posting results.
GameStop shares gained nearly 3% in after-hours trading after CEO and Chairman Ryan Cohen disclosed in a regulatory filing that he purchased 844,000 shares.
With the CPI report due Wednesday morning and Bank of America, Morgan Stanley, and Dutch semiconductor equipment maker ASML all scheduled to report earnings, markets face a dense stretch of data that could set the tone for the remainder of the month. Whether chip stocks find a floor will likely depend on how the inflation picture and upcoming earnings results interact with an already cautious investor sentiment.
Jay Goldberg is a staff writer at TechEchelon covering technology, markets, and policy. He files the breaking news and deal coverage that move the publication's core desks.
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