The chip sector has lost $500 billion in capitalization due to the sell-off. What should investors do?

Global investors withdrew about $500 billion from semiconductor stocks as a result of the sell-off that began on November 4 in the U.S. and continued on November 5 in Asian markets, Bloomberg reported. The total market capitalization of companies in the Philadelphia Semiconductor Index, a sectoral index, as well as in Bloomberg's index of Asian chipmakers decreased by that much.

The Nasdaq Composite index, heavily weighted toward technology companies, fell 2% on Tuesday, while the S&P 500 broad market index was down 1.17%. On the morning of Nov. 5, futures on the S&P 500 and Nasdaq were down 0.3% and 0.5%, respectively. In Asia on Wednesday, securities of memory makers Samsung Electronics and SK Hynix pulled down South Korea's Kospi index, which fell as much as 6.2% at one point before recovering some of its losses. Shares of Japan's Advantest were down 6% and the securities of Taiwan Semiconductor Manufacturing (TSMC), Asia's largest company by market value, were down 3%. All of them are suppliers to Nvidia.

Since April, chipmakers' capitalization has surged by trillions of dollars as investors bet on explosive demand for computing power for artificial intelligence. Now the decline reflects growing concerns about the sector's profitability and excessive market valuations, especially if high interest rates persist longer than expected, Bloomberg writes.

The sharp market moves reflect doubts not about investors' faith in artificial intelligence, but about the speed of market growth, Reuters writes.

- "The current sell-off appears to be largely due to a reallocation of positions - stocks that had previously performed best are falling the hardest," John Wither, senior portfolio manager at Pictet Asset Management in Singapore, said in a statement from the agency.

- "We are seeing massive selling in riskier segments of the market, which we think looks like short-term profit taking," Angus McGio, head of Asia equity distribution at Barrenjoey (Hong Kong), was quoted by Reuters as saying. He said fund managers focused on 2025 outcomes are now tending to avoid turbulence but are in no rush to exit the market in a big way. "Obviously they don't want to get rid of much, given that it's been quite a good year.... But if the market shows growth signals again, I think investors will quickly return to active buying," he added.

- "I wouldn't advise buying on the downturn now - much of the recent rally has lacked fundamentals, so it doesn't make sense to talk about bargain value right now. But if the biggest tech companies fall 15-20%, then it might be worth considering a buy," Choway Yak, CEO of hedge fund GAO Capital in Singapore, told Bloomberg.

- "There is a sea of red in the markets and it gives a bleak picture of current risks. We have to remain open to the possibility that the decline could continue. Simply put, there is little reason to buy right now," Pepperstone Group head of research Chris Weston said in a Bloomberg statement.

- Some analysts see the current decline as helpful as it allows the stock to "blow off steam" after an overheated rally and makes the stock a bit cheaper, Bloomberg writes. As global tech giants like Amazon and Meta Platforms continue to invest heavily in artificial intelligence, chip makers and other tech companies are expected to benefit from this - both in financial results and quotes, the agency added.

"We have come so far and so fast that investors should not be surprised if the fall continues tomorrow and the day after tomorrow," said Vikas Pershad, portfolio manager for Asian equities at M&G Investments, adding that now is a good time to look out for buying opportunities.

This article was AI-translated and verified by a human editor