The decline in chipmakers' stock prices was the longest in 16 months
Investors are concerned that capital expenditures on developing AI infrastructure are outpacing free cash flow generation
Photo: Unsplash/Vishnu Mohanan
The iShares Semiconductor ETF, which holds shares of the largest semiconductor and chip manufacturers, closed lower on Tuesday, October 13, marking its sixth consecutive session of declines. This is the longest losing streak since May 23, 2025, MarketWatch reported, citing Dow Jones Market Data. Of the 30 stocks in the PHLX Semiconductor Index, 22 are trading more than 20% below their all-time highs, most of which were reached back in May or June.
Details
iShares Semiconductor fell 0.17% on Tuesday. Shares of Applied Materials, a component of the index, were also among the worst performers in the broad-market S&P 500 on Tuesday, falling for the sixth consecutive session: MarketWatch reports that the investor day held by the company failed to inspire market participants.
Shares of South Korea's SK Hynix, which are not included in the PHLX Semiconductor Index, have been falling for seven consecutive trading sessions, losing 19.5% over that period.
What's going on?
Jeffrey Favuzza, an analyst at Jefferies, noted on Tuesday that one of the most common questions from clients is why there is widespread weakness in artificial intelligence-related stocks, according to MarketWatch. According to the analyst, several factors are influencing the market dynamics, including comments by Broadcom CEO Hock Tan that access to funding could become the main obstacle to the development of AI infrastructure. However, Favuzza believes the more significant issue is related to anticipation of the investor day at AI developer Anthropic, which may take place on Wednesday, October 14. Most investors expect the company to report annual recurring revenue exceeding $80 billion, the Jefferies analyst wrote.
"Over the past few weeks, evidence has mounted that investors are 'becoming less willing to finance AI spending at any cost,'" noted Daniel O'Regan, managing director of equity trading at Mizuho, as reported by MarketWatch. Capital expenditures on AI are outpacing free cash flow generation, so companies have to raise external financing to purchase equipment. If the terms of such financing deteriorate, it could impact spending on chips and other AI infrastructure, O’Regan wrote.
This article was AI-translated and verified by a human editor
