Chip stocks pullback seen as buying opportunity after sharp market sell-off

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Chip stocks buying pullback

Highlights

Chip stocks fell sharply with the iShares SOXX ETF down 8% and Invesco QQQ Trust ETF down 3% Tuesday after Asian market weakness.
Fundstrat’s Tom Lee notes a 7% semiconductor drop marks the 18th such event since 2011, with 88% one-month recovery odds historically, calling the dip a buy opportunity.
Rising memory prices, driven by AI-related computing demand, are boosting producer margins and equity valuations but raising costs for large buyers like Apple, per CEO Tim Cook.

Sell-off revives dip-buying case

As reported by CNBC, Fundstrat head of research Tom Lee says the sharp decline in chip stocks is a buyable pullback rather than the start of a deeper breakdown. He describes Tuesday's move as unusually severe, noting that semiconductor shares fall 6% or more in a single day only rarely, but such episodes have historically been followed by a recovery within a month in most cases.

Lee tells clients that semiconductors are down about 7%, marking the 18th such event since 2011. He says the group recovers more than 88% of the time one month later, reinforcing his view that the latest weakness creates an entry point for investors.

The market reaction is broad. The iShares SOXX semiconductor ETF drops about 8% on Tuesday, while the Invesco QQQ Trust ETF, which tracks the Nasdaq 100, loses around 3%. U.S. technology stocks come under pressure after a rout in Asian markets that sends South Korea's KOSPI index down nearly 10%.

Memory pricing supports sector outlook

Some major technology shares are higher in early Wednesday trading, with Broadcom and Intel posting modest gains. The rebound attempt comes after a powerful run in chip and memory stocks since late March, with the SOXX ETF up 84% over that period and the Roundhill Memory ETF, DRAM, rising about 150% since its early April launch.

Memory remains one of the most volatile corners of the chip industry, but demand for computing power linked to advances in artificial intelligence is helping tighten supply conditions. That imbalance gives producers stronger pricing power than usual, lifting profit margin expectations and supporting equity valuations across the sector.

Higher memory prices are also increasing costs for large technology buyers. Apple CEO Tim Cook says on the company's earnings call at the end of April that the company expects significantly higher memory costs in the June quarter, and believes those costs will have a growing effect on the business beyond that period.

Our earlier article on OpenAI and Broadcom’s Jalapeño custom AI chip explained how OpenAI is moving deeper into silicon to make AI inference cheaper and more efficient at scale. We noted that the partnership strengthens Broadcom’s role in designing tailored processors and reflects a broader industry push to ease reliance on Nvidia amid tight supply and high costs.

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