Investors dumping chip stocks hand over fist this summer may be forgetting something important: the strong fundamentals of the underlying companies.
Quick insight: JPMorgan is one of the first sell-side firms to come out bullish in the wake of the chip stock rout.
Others could soon follow, given the depth of the sell-off.
“We think that semis will find a floor soon on continued strong earnings delivery,” JPMorgan strategist Mislav Matejka said in a note on Monday.
“Our view is that fundamentals will likely remain constructive, as meaningful supply additions are not due before 2028, so it would be too early at present to price in an inflection … if hyperscalers capex guidance remains strong, then we think that investors should step back into the space over summer,” Matejka said.
The backstory: The closely watched iShares Semiconductor ETF (SOXX) is down 13% in the past month.
Semis are under heavy pressure as investors worry that the AI spending boom may be cooling. The sector has experienced years of extraordinary growth and soaring valuations. But it’s now facing concerns about potential export restrictions, tariffs, and geopolitical tensions that could disrupt chip sales to key international markets.
Not helping sentiment is the recent release of the low-cost Kimi K3 model by China’s Moonshot AI. Some on the Street are comparing it to the DeepSeek model release circa early 2025. These new Chinese models are calling into question whether US tech companies are overspending on AI.
“AI capex enthusiasm is beginning to cool,” strategists at Barclays warned in a new note.
The memory chip sector, which was 2026’s hottest trade, has been absolutely obliterated. Micron (MU) has lost $350 billion in market cap from its highs, while Sandisk (SNDK), Intel (INTC), Applied Materials (AMAT), and Lam Research (LRCX) have each shed more than $100 billion.
“So I don’t view it [the sell-off in memory names] too seriously. If you’re a long term believer and we have a very low cost in Micron, I’m not going to chase it here. But if it continues to decline, we will in fact step in,” Laffer Tengler Investment CEO and chief investment officer Nancy Tengler said on Yahoo Finance’s Opening Bid.
Brian Sozzi is Yahoo Finance’s Executive Editor, host of the Power Players with Brian Sozzi podcast, and a member of Yahoo Finance’s editorial leadership team. Follow Sozzi on X @BrianSozzi, Instagram, and LinkedIn. Tips on stories? Email brian.sozzi@yahoofinance.com.
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