(Bloomberg) — A gauge of global chip stocks and AI bellwether Nvidia Corp. have fallen together into a technical correction, showing moderation in the global equity market’s most conspicuous driver over the past year and a half.
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The Philadelphia Semiconductor Index and Nvidia dropped more than 3% each Wednesday, pushing them down more than 10% from record high levels reached in March.
In addition to concerns of the rallies becoming overheated, the sector has been hit by concerns over pushed back Federal Reserve interest rate cuts and China’s weak economy.
Dutch chipmaking equipment firm ASML Holding NV led Wednesday’s decline in the so-called SOX gauge after it posted disappointing orders for the latest quarter. Top customers are holding off as they work through stockpiles, though China’s buying of less-sophisticated machines has held up amid US restrictions on its access to high-tech equipment.
Earnings due later Thursday from Taiwan Semiconductor Manufacturing Co., the world’s largest foundry, will shed further light on the outlook for demand. Expectations have been raised since the company reported better-than-expected sales for the latest quarter.
While optimism has been priced into some chip stocks, “we suspect the sector could rebound after TSMC’s numbers, which we think should be solid,” said Amir Anvarzadeh, a Singapore-based strategist at Asymmetric Advisors. Still, there are concerns “about spending on mature nodes given the massive overcapacity being built in China.”
TSMC’s American depositary receipts are down 6.8% from their March all-time high. The biggest drags on the SOX in its drop into correction have been Advanced Micro Devices Inc. and Intel Corp., which are down more than 20% each since the gauge’s March 7 peak.
–With assistance from Charlotte Yang and Youkyung Lee.
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