AI Chip Stocks Were Unstoppable — Why Are Micron, SanDisk, and Other Stars Now Pulling Back?

According to MarketWatch, chip stocks had just begun to rebound recently, but their rally paused on Tuesday (the 18th) as investors started reassessing changes in the economic environment and the latest financial figures from a major AI company.

On Tuesday, many of the worst-performing stocks in the S&P 500 came from the semiconductor or optical industries. Coherent, Ciena, and Lumentum Holdings led the declines, each falling at least 9%. In the memory sector, SanDisk (SNDK-US) dropped 9%, while Micron Technology (MU-US) fell 7%.

Jeffrey Favuzza, equity trading analyst at Jefferies, noted that this sell-off followed pressure on Asian-listed tech stocks and could also be linked to market concerns over elevated U.S. Treasury yields.

Additionally, he pointed out that according to Bloomberg, AI startup Anthropic, as it prepares for its anticipated IPO, has already achieved an annualized revenue run rate exceeding $65 billion. Favuzza described this figure as 'remarkable,' yet 'feels slightly below recent market expectations.'

Other chip stocks also weakened broadly on Tuesday: AMD (AMD-US) fell 4.3%, Nvidia (NVDA-US) dropped 2.3%, Intel (INTC-US) slid 6.6%, Marvell Technology (MRVL-US) plunged 7.8%, and Broadcom (AVGO-US) declined 3.2%.

David Wagner, head of equities at Aptus Capital Advisors, said Tuesday’s pullback may reflect investors taking profits and moving into cash after recent strong gains in AI hardware stocks.

Paul Meeks, head of technology research at Freedom Capital Markets, noted that memory companies currently have 'very strong fundamentals,' but bearish investors are still waiting for the 'inevitable' price collapse typical of commoditized chips like memory.

However, he believes the recent long-term contracts signed by Micron and SanDisk with customers could change how the market views these memory suppliers. Both companies stated that the minimum prices guaranteed under these multi-year contracts will exceed the peak prices seen during previous memory booms.

Ion Jauregui, analyst at ActivTrades, said that given the extraordinary recent share price gains, volatility and profit-taking pressure in high-beta tech stocks are likely to remain elevated. High-beta stocks refer to those whose price movements are more volatile than the overall market.

Nonetheless, Jauregui emphasized that demand for memory and storage products still exists and is growing rapidly. He believes investors are 'growing increasingly confident that AI capital expenditures will remain strong,' which should continue to support the broader semiconductor industry.

Jauregui further stated that market momentum for chip stocks remains strong, but market expectations are also rising. Therefore, while he 'remains bullish on the structural growth story of AI,' he cautioned that short-term risks should be approached with caution if market expectations begin to weaken in the future.