Semiconductor Rout Deepens as SMH Sinks 6.5%; Micron Tumbles 11.4%, TSMC and Nvidia Slide

Semiconductor stocks suffered a sharp, broad-based selloff as investors rotated aggressively out of the AI trade that has powered markets for much of the past year. The VanEck Semiconductor ETF (SMH) fell 6.5% to $625.62, one of its steepest single-session declines, after trading as high as $671.83 just one day earlier. Memory-chip maker Micron led the losses, plunging 11.4% as the trade's center of gravity shifted toward high-bandwidth memory (HBM) — and amplified the downside when sentiment turned. Taiwan Semiconductor, the contract manufacturer at the heart of the AI supply chain, slid 5.2%, while AI bellwether Nvidia fell 3.2%. The damage spread across the sector, with chip-equipment names and peers including AMD, Broadcom, ASML and STMicroelectronics all caught in the downdraft. The rout was global. South Korea's tech-heavy Kospi closed nearly 10% lower, triggering a market-wide circuit breaker, as Samsung Electronics and SK Hynix — which together account for roughly half the index — both shed more than 12%. In Europe, the Stoxx 600 Technology index led regional losses, with ASML and STMicroelectronics falling more than 7%. U.S. stock futures pointed sharply lower as the global selloff deepened. The immediate trigger was renewed scrutiny of AI infrastructure spending after Alphabet's slide raised questions about the durability of hyperscaler capex, compounded by worries over U.S. interest rates and caution ahead of key inflation data and Micron's earnings. Investors who had crowded into the Magnificent Seven and chip names began taking profits after a historic run. Many analysts framed the move as profit-taking and valuation reset rather than evidence of deteriorating fundamentals. Micron has reportedly sold out its entire 2026 HBM production under long-term contracts, and Nvidia and TSMC remain structurally central to AI computing. One strategist characterized the episode as another 'gut check moment' in a trade still in its 'third inning,' noting that SMH has returned roughly 156% over the past year and recently attracted nearly $7 billion in inflows. Still, the speed and breadth of the decline — and the extreme index concentration exposed in Korea — underscore how vulnerable richly valued, AI-levered names have become to shifts in sentiment. With memory chips now as pivotal as GPUs to the trade, volatility is likely to remain elevated as the market reassesses how much future AI demand is already priced in. Sources: CNBC, Bloomberg, Morningstar, Yahoo Finance, Kavout.