Semiconductor stocks experienced a significant downturn, losing approximately $2 trillion in market value over eight consecutive trading sessions. This decline marks the longest losing streak for the sector since 2008, with the Philadelphia Semiconductor Index dropping more than 11% during the previous week.
The sell-off is largely attributed to rising interest rates and concerns regarding the profitability of artificial intelligence investments. The 10-year Treasury yield reached 5.10% at the start of Monday, creating pressure on debt-funded firms that rent out AI computing power. Analysts suggest that a reduction in yields by 0.5 to 0.75 percentage points could alleviate this financial strain.
Market experts remain divided on the future of the AI boom, with forecasts for peak spending ranging from one to four years. While some point to share buybacks and take-or-pay contracts at companies like Micron as signs of stability, others warn that such measures may not provide sufficient protection once spending cycles reach their limit.
Upcoming earnings reports from major industry players, including Lam Research, Texas Instruments, Western Digital, Meta, Tesla, and SpaceX, are expected to serve as a critical test for the sector. Investors are now evaluating AI-related companies based on actual returns on capital rather than projected spending growth, given the high cost of borrowing.
