NEW YORK, July 17, 2026, 12:25 p.m. EDT — The semiconductor sector staged a moderate recovery from a steep morning selloff on Friday, though gains remained limited as the broader index still hovered in negative territory. The iShares Semiconductor ETF (SOXX) bounced back 5.4% from its intraday low of $498.69 to trade at $525.43, but was still down 1.0% from Thursday’s close.
Despite the rebound, the PHLX Semiconductor Index (SOX) had earlier exceeded a 20% decline, marking its steepest weekly drop since March 2025. The recovery failed to erase the week’s valuation correction, leaving investors cautious about the near-term outlook.
Of the six leading chip stocks tracked, only two—Micron Technology (MU) and Arm Holdings (ARM)—managed to close higher by midday. Micron surged 3.7% to $884.81, rebounding 10.0% from its session low, while Arm rose 1.2% to $265.27, recovering 9.0% from its low. Other major names lagged: Advanced Micro Devices (AMD) fell 0.4% to $499.00, ASML Holding (ASML) slipped 0.6% to $1,774.56, Nvidia (NVDA) dropped 1.4% to $204.43, and Taiwan Semiconductor Manufacturing (TSM) declined 1.9% to $402.00.
The median rebound across the six stocks was 6.2% from intraday lows, but the median daily return remained negative at -0.5%. The recovery was sharp but narrow, lacking broad leadership. Nvidia, the previous frontrunner, recorded the weakest bounce at just 3.2%.
The early selloff was triggered by renewed doubts about the profitability of AI investments. China’s Moonshot launched Kimi K3, an open-weight model with 2.8 trillion parameters, reigniting concerns about returns from massive U.S. AI spending. The news weighed heavily on sentiment, particularly for chipmakers tied to AI infrastructure.
Despite the market jitters, TSMC reported robust underlying demand. Second-quarter revenue reached $40.2 billion with a gross margin of 67.7%, driven by high-performance computing, which accounted for 66% of total revenue. The company forecast third-quarter revenue between $44.6 billion and $45.8 billion, implying 12% sequential growth at the midpoint. CEO C.C. Wei expressed strong confidence in the “multi-year AI megatrend,” but TSMC also raised its 2026 capital expenditure forecast to $60 billion–$64 billion, reflecting the mounting costs of meeting demand. Management warned that overseas fabs could reduce gross margin by 2 to 4 percentage points.
Toni Meadows, head of investments at BRI Wealth Management, highlighted “rising scrutiny of AI capex sustainability,” noting that earlier valuations were built on assumptions of nearly flawless demand. The sector now faces a pivotal test next week when Intel (INTC) reports second-quarter earnings after the close on July 23.
Analysts see risks in both directions. If cloud budgets remain subdued, the valuation adjustment may continue. However, robust spending or improved margins could trigger a swift recovery. For now, the tape shows a sharp rebound, but broad leadership is still missing. Micron and Arm held their gains, while the benchmark failed to follow.
