Chip Stocks Plummet After Recent Rally

Chip stocks dropped on Tuesday, pulling back from a massive rally that broadened the artificial intelligence trade beyond Nvidia and propelled the sector to new highs. Qualcomm plummeted 13% and headed for its worst session since 2020. Intel dropped 8%, while On Semiconductor and Skyworks Solutions declined more than 6% each. The iShares Semiconductor ETF tracking the sector sank 5%. Tuesday's declines followed a hotter-than-expected reading of a key consumer inflation measure as the war in Iran lifts oil prices, sending investors into risk-off mode. The recent rally has broadened the AI trade beyond chipmaking stalwart Nvidia, which, for years, nearly single-handedly lifted stocks to fresh highs. Skyrocketing demand for central processing units, and their graphics processing unit counterparts that underpin large language models, has boosted chip stocks to records. Investors are betting that the transition from AI training to agents will boost demand for other AI components. That includes memory chip makers, which are hiking prices amid an ongoing supply shortage.