The chip-stock rally hits a speed bump - but these analysts see reason to be hopeful

By Britney Nguyen

Previous instances of short-term pressure on semiconductor stocks opened up opportunities for investors who bought the dip, according to one analyst

Seagate Technology Holdings' stock fell 7.9% on Wednesday.

Semiconductor stocks experienced renewed pressure on Wednesday as the artificial-intelligence trade lost some shine and investors poured into other corners of the market.

Shares of server maker Dell Technologies (DELL) were among the biggest losers in the broader S&P 500 SPX, finishing down 6.6% on Wednesday. Memory and storage stocks also lost momentum, with Seagate Technology Holdings (STX) falling 7.9%, Western Digital (WDC) losing 6.9%, Sandisk (SNDK) shedding 3.5% and Micron Technology (MU) slipping fractionally.

At the same time, software stocks like Salesforce (CRM) and ServiceNow (NOW) logged sizable daily gains, suggesting that investors may be moving money to technology shares that haven't climbed as much this year.

Mizuho analyst Daniel O'Regan said Wednesday's action "feels less like a fundamental reset and more like a positioning unwind." He noted that although spending on AI, data-center demand and AI adoption are still "largely intact," investors typically sell what they own when there's a slowdown in the market.

Still, O'Regan said in a note to clients that similar "waterfall moves" have resulted in opportunities for investors - and that going forward, the market will have to assess whether the recent moves are an indication of short-term portfolio shifts or "a broader reassessment of AI spending expectations."

Allen Bond, a managing director at Jensen Investment Management, also pointed to recent reports that prompted investor questions about the financials at AI startups. And he highlighted pushback against data-center construction, which is criticial to driving further demand for semiconductor components.

"When you think about the memory and storage companies, they're the most exposed to that incremental supply and demand," Bond said.

The supply crunch for memory and storage components has allowed companies to raise prices and score long-term customer contracts that aim to smooth out the market's cyclical behavior.

"Any changes that cast doubt on that is probably more likely to be reflected in those stock prices," Bond said, referring to data-center-driven demand for memory and storage products.

David Fetherstonhaugh, an investment strategist at VistaShares, pointed to SK Hynix's (SKHY) (KR:000660) stock-buyback announcement Wednesday as another driver of chip-stock selling.

"One camp sees any buyback as proof the company isn't investing enough and that growth is over," he said in emailed comments.

Like O'Regan, Fetherstonhaugh said the recent weakness in memory and storage names is more due to "a macro-driven pullback rather than deterioration in the underlying memory story."

-Britney Nguyen

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08-19-26 1802ET