Chip Stocks Suffer Brutal Selloff as Philadelphia Semiconductor Index Plunges 10% in a Single Day
Alina Collins
Broadcom's earnings call ignited a two-day rout across U.S. chip stocks: the SOX index fell 10.26% on Friday — its worst single-day drop since the March 2020 pandemic crash — erasing over $1.3 trillion in combined market cap and forcing a broad repricing of AI's lofty valuations.
What went wrong at Broadcom?
Broadcom's fiscal Q2 results actually beat estimates, but CEO Hock Tan disclosed on the earnings call that key custom-AI-chip client Google may further diversify its supply chain.
This means → the market's fear is not about today's profits but about Broadcom's long-term growth ceiling being lowered.
Broadcom shares plunged 13% on Thursday — wiping out roughly $286 billion in market cap, the fourth-largest single-day loss for any U.S.-listed company — then fell another 7.9% on Friday, for a two-day decline of nearly 20%.
How did the selloff spread across the sector?
Nvidia dropped about 6% on Friday, shedding over $300 billion and slipping below the $5 trillion mark; Micron tumbled 13%, falling below the $1 trillion threshold.
Marvell plunged nearly 17%; AMD and Intel each fell roughly 11%. Quantum-computing names were hit even harder — IonQ and D-Wave lost about 12%, Rigetti 12.5%.
In plain terms = Broadcom's bad news toppled the first domino, and the entire AI-chip chain — from leaders to fringe plays — fell with it.
Why isn't this just a "bad earnings" story?
The selloff was driven by two forces at once: Broadcom's report recalibrated expectations for AI-chip revenue acceleration, and the May U.S. payrolls print of 172,000 jobs — well above forecasts — reinforced "higher for longer" rate expectations.
This means → growth expectations revised down + rate expectations revised up, squeezing richly valued chip stocks from both sides.
Prop trader Dennis Dick put it bluntly: "For a long time, investors bought chip dips almost blindly — and it kept working. Today, that's over."
Why did the old "buy the dip" playbook suddenly stop working?
A massive buildup of call options had been steadily pushing chip stocks higher, creating a narrow, concentrated rally.
In plain terms = the more money crowded into the same trade on the way up, the more violent the stampede when the direction reversed.
Nvidia and Micron breaching round-number market-cap levels carries clear psychological impact and may trigger further stop-loss orders and passive de-risking.
Wall Street's debate — correction or reversal?
Wells Fargo chief equity strategist Ohsung Kwon said semis were "clearly overbought" and a pullback was "not surprising," adding: "I don't think the semiconductor bull market is over."
Other analysts note the growth bar for AI-chain companies is now far higher than before — even strong results can trigger a selloff if they fail to meaningfully beat expectations.
This reflects a deeper issue: once valuations price in perfection, any signal short of perfection gets amplified.
What should investors watch next?
Despite the rout, the SOX index is still up 73% year-to-date and hit an all-time high just last Wednesday — the pullback, relative to the prior run, remains contained.
The market is also digesting another pressure: SpaceX is preparing to launch a historic IPO at a valuation of up to $1.75 trillion, raising concerns that capital may rotate out of richly valued tech stocks.
The long-term case for AI infrastructure spending has not broken, but Google's supply-chain diversification signal and rate-path uncertainty are compressing valuations in tandem — the next key tests are Fed policy signals and major tech clients' capex data.
Content is for reference only, not financial advice.