Semiconductor Stocks Plunge as Investors Take Profits After 80% First-Half Rally
<cite index="17-2">The tech-heavy Nasdaq index fell as investors dumped semiconductor names, taking profit after the swath of stocks surged more than 80% in the first half of 2026.</cite> The selloff reflects profit-taking and potential concerns about valuations in the AI infrastructure buildout.
Massive Profit-Taking in Chip Sector
The Nasdaq Composite declined 0.66% to 26,040.03, as the tech-heavy index fell when investors dumped semiconductor names, taking profit after the swath of stocks surged more than 80% in the first half of 2026. The sharp rotation out of semiconductors marked a notable shift in market leadership after months of dominance by AI-related hardware makers.
Major Chip Stocks Under Pressure
The VanEck Semiconductor (SMH) ETF dropped 4.5%, led by a 13.6% decline in Teradyne and a 11.5% slide for KLA, while Nvidia shares also pulled back 1.4% and Micron shares lost 5.5%. Memory chip stocks, which had been among the strongest performers during the boom in AI data center buildout, faced particularly steep declines.
Market Breadth Improves as Rotation Accelerates
Sandisk, Micron Technology, Applied Materials, and Lam Research all fell about 10% as investors took profits following a great run for chip stocks, while Intel and Marvell both fell about 9%, and the PHLX Semiconductor Index (SOX) lost 6.7% after roughly doubling during the second quarter.
Broader Market Benefits from Diversification
Despite the weakness in semiconductors, a majority of S&P 500 stocks and sectors rose on the day, a further sign of market rotation. This broadening of market participation suggests that while the semiconductor sector cools, economic strength in other areas may be sustaining overall market gains into the second half of 2026.