A sharp selloff in semiconductor stocks is pushing the sector toward bear market territory, as investors reassess the sustainability of the AI-driven rally.
An industry benchmark is down about 20% from its peak, marking the steepest weekly decline since April 2025. The pullback has been fueled by rising competition, including a breakthrough from a Chinese AI startup, alongside broader geopolitical tensions impacting global markets.
Despite continued strong earnings and demand, investors are increasingly questioning whether heavy AI investment will deliver sufficient returns, prompting profit-taking after a record run.
Analysts suggest the volatility may reflect a maturing AI investment cycle and a broader market rotation away from tech, rather than a fundamental collapse in the sector.