Chip ETF’s 11% Retreat From Peak Puts AI Investment Thesis Under the Microscope

iShares MSCI Global Semiconductors ETF falls 0.78% Friday, down 11.73% from June high; ON Semiconductor plunge and Meta cloud sale spark volatility, while year-to-date gains remain at 92.44%.

The iShares MSCI Global Semiconductors UCITS ETF closed Friday at €19.00, shedding 0.78% on the day and 1.55% over the week. What catches the eye, however, is the gap from its all-time high of €21.52 on June 22 — a 11.73% pullback that has injected fresh unease into a fund still sitting on a staggering 92.44% year-to-date gain. That tension between a searing rally and a sudden stumble is now the central question for the semiconductor trade.

Two events on July 2 acted as catalysts for the selloff. ON Semiconductor plunged roughly 20% after announcing it would acquire Synaptics in an all-stock deal, triggering fears of dilution that rippled through the sector. Almost simultaneously, Meta Platforms confirmed it would begin selling excess cloud and AI computing capacity to external customers, casting doubt on the returns expected from the massive infrastructure buildouts underpinning the chip boom. The Philadelphia Semiconductor Index dropped 6.3% that day, with individual names hit harder: KLA fell 12%, Applied Materials 10%, and Lam Research 9.7%.

These jolts come on top of a broader reassessment of AI?related capital expenditure that has already erased more than $1 trillion in market value from chipmakers over recent weeks. Intel lost over 20% during the stretch, closing Friday down nearly 3% and almost 10% for the week. Analysts are drawing comparisons to June 2000, just months before the dot?com bubble burst. The BofA Bubble Risk Indicator now stands at 0.91, well above the Nasdaq 100’s reading of 0.69. Political uncertainty adds another layer: some investors worry that a Federal Reserve helmed by Kevin Warsh could raise rates to combat inflation, further pressuring the rate?sensitive technology sector.

The ETF’s 30?day annualized volatility has clocked in at 70.65%, and BTIG chief strategist Jonathan Krinsky notes that the US?listed SOXX semiconductor ETF moved at least 3.9% in each of six consecutive trading sessions — a pattern he describes as extreme, pointing “at best to a lengthy consolidation phase, at worst to a more significant top.” Yet the fund’s relative strength index stands at a neutral 50, and the current price is 3.86% above its 50?day moving average of €18.29 while remaining well above the 100?day average of €15.09, underscoring how far the sector has stretched from its longer?term norms.

Inside the portfolio, the pain is uneven. Equipment makers such as Lam Research and KLA face an oversupply of NAND memory chips that could persist into the third quarter of 2026. By contrast, demand for AI?specific logic chips remains robust, and power semiconductor producers actually saw prices rise across the board on July 1 — a counter?trend fueled by steady orders from AI and automotive markets. Among the fund’s top holdings are Micron Technology, AMD, Broadcom, Taiwan Semiconductor, and Nvidia, alongside SK Hynix, Lam Research, ASML, Intel, and Applied Materials.

Midsummer also brought a landmark event for the sector: SK Hynix’s Wall Street debut. The South Korean memory?chip leader, a dominant force in high?bandwidth memory used by Nvidia and AMD, priced its American depositary receipts at $149 — a 2.7% premium to the prior three?day average — and raised $26.5 billion in the largest foreign IPO in U.S. history. The company simultaneously secured $8.6 billion in advanced EUV lithography tools from ASML. Micron, meanwhile, raised its U.S. investment target to $250 billion by 2035 and broke ground on a major facility in New York. One market veteran described the environment bluntly: “Global semiconductors are currently the most crowded trade in the world.”

The ETF’s structure offers some insulation relative to its peers. It physically replicates the MSCI ACWI IMI Semiconductors & Semiconductor Equipment ESG Screened Select Capped Index, covering large?, mid?, and small?cap names from developed and emerging markets. That breadth historically dampens single?stock shocks compared to funds with heavier Nvidia weighting — though it cannot fully sidestep a sector?wide rotation.

Looking ahead, the tug of war between bears and bulls hinges on earnings. The industry is expected to post 131% profit growth in the second quarter of 2026. Many analysts view the current selloff as a “reset in the middle of the cycle” and maintain elevated 12?month price targets on Nvidia and Micron. For the iShares fund, the next decisive moves will likely be shaped by quarterly reports from ASML and Taiwan Semiconductor Manufacturing.