AI Chip Crisis: PHNX Index Falls 11% in Two Days

What happened?

The PHLX Semiconductor Index (SOX), which had risen more than 80% in the first half of 2026, suffered a 6.3% drop on Wednesday and a 5.4% drop on Thursday, accumulating a decline of approximately 12% in two sessions, according to The Next Web. The correction occurred in the week leading up to the U.S. Independence Day, a traditionally low-volume period, which may have amplified the move. This index, which groups 30 companies in the semiconductor sector, includes heavyweights like Nvidia, AMD, Intel, TSMC, and Qualcomm. The decline erased more than $500 billion in market capitalization from the sector in just 48 hours, according to Bloomberg calculations. Trading volume was 40% below the 30-day average, suggesting the correction may have been exaggerated by a lack of liquidity.

Why is it important?

The AI chip boom, led by Nvidia, AMD, and Intel, has been the engine of the stock market in 2026. Nvidia, for example, had multiplied its value by 5 since early 2025, reaching a market cap of over $4 trillion. The PHNX decline suggests that investors are rotating capital from hardware to AI software, anticipating that value will shift from infrastructure to applications. This phenomenon echoes the dot-com bubble, where infrastructure makers (like Cisco and Sun Microsystems) benefited first, followed by software companies (like Microsoft and Oracle). However, there are key differences: in 2000, internet infrastructure was nascent, while today the demand for AI chips is backed by massive investments from hyperscalers. According to IDC data, spending on AI servers reached $250 billion in 2025, and is expected to grow 30% in 2026. Nevertheless, the market is beginning to question whether that pace is sustainable.

Consequences for the market

The rotation could mean that chipmakers face short-term bearish pressure, while software companies like Microsoft, Salesforce, or generative AI startups like Anthropic and Cohere could attract investment flows. In the week of the correction, the software ETF (IGV) rose 2.1%, while the semiconductor ETF (SMH) fell 11%. However, the PHNX decline also reflects uncertainty about the sustainability of chip demand, especially if hyperscalers (Google, Amazon, Meta) moderate their orders after record capital spending. For example, Meta announced in April a capital expenditure plan of $80 billion for 2026, but some analysts fear that returns on generative AI may not meet expectations. Additionally, the Biden administration has intensified restrictions on exports of advanced chips to China, which could affect revenues of companies like Nvidia, which derives approximately 20% of its sales from the Chinese market (through adapted products). This geopolitical factor adds volatility to the sector.

What should readers know?

The AI market is maturing: the 'buy everything GPU-related' phase is giving way to a more granular selection. Investors should evaluate which companies have real competitive advantages in software, data, or models. For example, Microsoft has integrated Copilot across its entire productivity suite, while Salesforce has launched Einstein GPT for CRM. Moreover, the low volume during the holiday week may exaggerate the correction, so it is prudent to wait and see if the trend consolidates. Historically, corrections of more than 10% in the SOX have occurred several times in recent years, such as in October 2024 (a 15% drop on recession fears) and March 2025 (a 12% drop on trade tensions). In both cases, the index recovered in the following months. However, this time the context is different: the market is at all-time highs and concentration in a few stocks (Nvidia, AMD, Broadcom) is extreme. The SOX index has a 0.9 correlation with Nvidia's performance, meaning any negative news about the company can drag down the entire sector.

“The AI chip trade is broken, and the search for its replacement begins,” summarizes The Next Web.

In conclusion, the correction in the PHNX Semiconductor Index is not necessarily the end of the AI bull cycle, but it is a sign that investors are reassessing their bets. The rotation toward software could be a long-term trend, but the fundamentals of the chip sector remain solid. The key will be in the upcoming quarterly reports from Nvidia (expected in late August) and the spending decisions of hyperscalers. For now, caution and diversification seem to be the best strategies.