The semiconductor sector is entering a phase of higher volatility following the very strong rebound seen in April and early May. According to Seaport Research, some companies have started to move ahead of their underlying fundamentals, even though the long-term AI trend remains one of the key growth drivers for the entire industry.
- Semiconductors still remain the backbone of the AI-driven equity rally, especially after the iShares Semiconductor ETF gained around 65% since the beginning of the year. However, the coming weeks may favor companies with more realistic valuations and a clearer earnings growth path, while putting pressure on stocks where expectations have already become nearly perfect.
- Seaport analyst Jay Goldberg believes the chip sector could remain “choppy” in the near term, meaning more nervous and vulnerable to corrections. In his view, AMD and Intel have a relatively better chance of growing into their current valuations over time. Nvidia, on the other hand, remains constrained by extremely high market expectations and ongoing supply limitations.
- KKM Financial sees the recent sell-off primarily as profit-taking after a historic rally. Jeff Killburg argues that investors are currently treating semiconductor stocks like a “short-term ATM,” reducing positions to increase cash holdings after the sector’s parabolic move higher. In his view, this does not necessarily signal the end of the trend, but rather an attempt to lock in gains after exceptionally strong performance.
At the same time, demand for processors, memory chips, and specialized AI hardware remains very strong. Supply shortages have supported margins across the semiconductor industry, but they have also increased costs for hyperscalers such as Apple and Google. This remains an important risk factor, because if large technology companies begin tightening data center spending, some of the market’s current growth expectations could prove too optimistic. However, the biggest market drivers remain intact, so the correcion may finally lead to the another leg of growth.
Source: xStation5
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