Should Investors Overinterpret This Memory Sell-Off?

Semiconductor stocks have faced fierce selling pressure this summer, but JPMorgan believes the market may be overly focused on risks such as a slowdown in artificial intelligence (AI) investment, overlooking the fact that underlying corporate fundamentals remain strong. As chip-related stocks have sharply pulled back, JPMorgan has become one of the first Wall Street sell-side firms to adopt a more optimistic stance toward the semiconductor sector.

JPMorgan strategist Mislav Matejka said in a report on Monday that semiconductor stocks could soon find a bottom, supported by companies continuing to deliver strong earnings. Given the magnitude of this correction, he expects other Wall Street institutions may soon follow with more positive outlooks.

Matejka pointed out that semiconductor industry fundamentals could remain robust, primarily because large-scale new supply will not hit the market until at least 2028, making it premature to price in an industry downturn. If major cloud service providers maintain strong capital expenditure guidance, investors may consider repositioning into semiconductor stocks during this summer.

The iShares Semiconductor ETF (SOXX-US), closely watched by the market, has fallen approximately 13% over the past month. Chipmakers benefited over the past few years from rapid expansion in AI infrastructure investment, driving both operational performance and valuations higher. However, investors have recently begun worrying that the AI spending boom may be cooling. Export restrictions, tariffs, and geopolitical tensions could also disrupt chip shipments to key overseas markets.

China's AI startup Moonshot AI recently launched a low-cost model called Kimi K3, further undermining market confidence. Some on Wall Street have compared this to the emergence of DeepSeek's model in early 2025, fearing that more cost-efficient Chinese models could reduce the necessity for U.S. tech giants to continue massive investments in AI infrastructure.

Barclays strategists warned in their latest report that enthusiasm for AI capital expenditure is beginning to cool, reflecting growing investor skepticism about whether the massive funds deployed by tech giants can be converted into revenue and profit as expected.

Memory chips were once among the hottest investment themes for 2026, but have recently become a major target of selling pressure. Micron (MU-US) has seen its market capitalization shrink by about $350 billion from its peak. SanDisk (SNDK-US), Intel (INTC-US), Applied Materials (AMAT-US), and Lam Research (LRCX-US) have each lost over $100 billion in market value from their highs.

However, Nancy Tengler, CEO and Chief Investment Officer at Laffer Tengler Investments, believes investors need not overinterpret this memory stock sell-off. She said that if one remains bullish on the industry's long-term outlook, there's no need to chase prices now, but further price declines could instead offer opportunities to buy in gradually.