Semiconductor stocks fell into a bear market in July as the AI trade that had powered a first-half rally began to unwind. Nvidia slipped about 2.5% while Broadcom took a harder hit on guidance concerns, and a Bank of America survey found fund managers see chips as the market's most crowded trade. Bitcoin, meanwhile, held above $64,000 through the turbulence.
Semiconductor stocks slipped into bear market territory in July, with the Philadelphia Semiconductor Index logging single-session declines of roughly 5% to 6%. The index had gained over 100% in the first half of the year, powered almost entirely by the market's conviction that AI would require unprecedented volumes of chips.
A $1.3 trillion rally reverses
The reversal started in early June, when the sector shed approximately $1.3 trillion in combined market value over a short stretch of sessions. Nvidia, the face of the AI chip boom, retreated around 2.5% during the sell-off, while Broadcom's situation was more acute as the company faced guidance challenges that spooked investors who had priced in near-perfect results. Memory chip makers Micron and SK Hynix also took hits, erasing gains built up over months of AI-adjacent enthusiasm.
No single headline explains the sell-off; instead, a convergence of anxiety over whether AI capital spending could sustain its pace, rising interest-rate concerns, and geopolitical tensions weighing on tech supply chains drove the decline. A Bank of America survey of fund managers conducted in July found that 82% of respondents identified semiconductors as the single most crowded trade in the market.
Bitcoin holds its ground as chips stumble
The rotation looks especially striking against the first half's scoreboard. The index returned roughly 102% over that period, while Bitcoin fell 33% over the same stretch. But the semiconductor sell-off changed the arithmetic: as the AI trade unwound and fund managers rotated toward steadier sectors such as transportation, Bitcoin held above $64,000 through July's turbulence.
Semiconductor stocks had outperformed Bitcoin by 135 percentage points over six months. The guidance concerns at Broadcom carry weight beyond one earnings call, since a company at the infrastructure heart of the AI buildout signaling uncertain forward demand forces markets to revisit assumptions about data center spending timelines.
For crypto investors, Bitcoin's ability to hold above $64,000 while Wall Street's most beloved trade unraveled is a data point, not a thesis. It suggests a degree of decorrelation from the AI equity complex, notable given how closely crypto had tracked risk assets in prior cycles.
Source: Crypto Briefing
Trading involves risk.
Risk Disclaimer
