AI Chip Stock Sell-Off Was 'Wake-Up Call,' Analyst Says – Investor's Business Daily
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Nvidia (NVDA) stock and shares of other AI chip companies rebounded Friday after Thursday’s brutal sell-off, which one analyst described as a “wake-up call” for artificial intelligence plays.
“Yesterday was the wake-up call many expected and wanted in order to start taking at least some profits in Mag 7 tech and semi AI winners,” Mizuho Securities trading-desk analyst Jordan Klein said in a client note Friday.
Magnificent Seven stocks and semiconductor stocks exposed to the AI megatrend have been big winners this year, but some Wall Street pros are warning of a bubble. Skeptics of the generative artificial intelligence market include Jim Covello, Goldman Sachs’ head of global equity research, and Ed Yardeni, a leading economist and president of Yardeni Research.
The semiconductor stock sell-off on Thursday was a preview of what will happen when the eventual unwind of AI stocks occurs, Klein said.
“Yesterday’s semi sell-off (was) a quick preview of what is to come when Nvidia finally guides only ‘in line’ or misses the whisper (number) by a real amount,” Klein said. “Yes, that day will eventually happen.”
On Thursday, the iShares Semiconductor ETF (SOXX) fell 3.3%. The exchange-traded fund tracks the performance of the Philadelphia semiconductor index, known as SOX. The SOX includes the 30 largest semiconductor stocks traded in the U.S., led by Nvidia stock and Taiwan Semiconductor Manufacturing (TSM).
On Thursday, Nvidia stock tumbled 5.6%. Taiwan Semi retreated 3.4%. Arm Holdings (ARM) plummeted 7.1%. Broadcom (AVGO) sank 2.2%. Marvell Technology (MRVL) dropped 3.6%.
Semiconductor equipment manufacturers also were punished. ASML (ASML) fell 3.3%. Applied Materials (AMAT) plunged 5.4%. Lam Research (LRCX) tanked by 6%. KLA (KLAC) pulled back by 4.4%.
But chip stocks bounced back on Friday. In afternoon trades on the stock market today, the iShares Semiconductor ETF was up 1.8%.
Nvidia stock climbed 2.1% to 130.04. Taiwan Semi rose 2% to 188.20. Arm advanced 5% to 181.90. Broadcom was up 0.3% to 1,710.86. Marvell surged 2.2% to 73.68.
Shares of chip-gear giants ASML, Applied Materials, Lam Research and KLA also rose.
Klein said it’s “not time to bail on the AI semi trade just yet.”
“Cloud hyperscaler results and capex comments (think Microsoft (MSFT), Amazon (AMZN), Meta (META), Alphabet (GOOGL)) in coming weeks should all be supportive for AI compute expansion for more training of LLMs (large language models) and inferencing,” he said.
Klein added, “My guess is the Nvidia/AI semi unwind comes when some of the large cloud hyperscalers talk about moderating (vs. cutting) capex investment growth. I do not expect that through calendar 2025.”
Nvidia stock is the poster child for the AI stock rally. Last year, Nvidia rose 239%. So far this year, it is up about 163%.
Follow Patrick Seitz on X, formerly Twitter, at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
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