What to know about the AI chip stock selloff

Shares of artificial intelligence chipmakers continued to slide on Friday, resuming the lackluster performance that has bedeviled many of the companies in recent weeks as investors scrutinize the AI industry.

The slump followed an earnings report issued Thursday afternoon by Taiwan Semiconductor Manufacturing Co. (TSMC), which exceeded expectations for profit and revenue, but came alongside an announcement of plans for higher capital expenditure than previously forecast. Shares of TSMC fell more than 3% as of Friday afternoon.

Even Nvidia, the high-flying leader in the AI chip race, saw its share value decline 1.4% as of Friday afternoon.

In all, the tech-heavy Nasdaq dipped 1.2% as of Friday afternoon, while the S&P 500 fell nearly 0.9%. The Dow Jones Industrial Average dropped 0.6%.

Here’s what to know about the slump for AI chipmakers:

An array of semiconductor stocks dipped on Friday.

Intel slid 0.8% as of Friday afternoon, while Applied Materials tumbled 4.6%. Corning dropped 1.8%.

Advanced Micro Devices, which boasts a market capitalization of about $800 billion, saw its shares fall more than 1%.

The slump spared some top firms in the sector, however. Idaho-based Micron Technology climbed 3.5 %, and Sandisk jumped nearly 2%.

Yes, a market slump has befallen chipmakers on and off for roughly the past month.

The SMH, which tracks the performance of the 25 largest U.S. semiconductor firms, has dropped 9.5% compared to a month earlier.

Despite their recent struggles, many major chipmakers remain well above their stock price at the start of 2026. Indeed, some analysts previously told ABC News the current selloff owes primarily to a phenomenon called profit-taking, when traders sell off some of their shares to lock in returns after a prolonged run-up in price.

Micron has soared 209% in value this year. Sandisk has climbed a staggering 506% over that period. Nvidia, the world’s largest company as measured by market capitalization, has grown 10% this year.

In addition to profit-taking, the downturn may also reflect jitters about immense investment in AI, the analysts said, especially as Wall Street anticipates a possible hike in interest rates later this year. That in turn could make it more expensive for firms to borrow the money necessary to develop the cost-intensive technology.

Critics say the considerable costs have put pressure on AI to deliver stratospheric profits, but there is little evidence to suggest businesses or everyday users will get enough value to warrant forking over a mountain of cash. The technology must deliver within years rather than decades, critics add, since the current level of spending cannot be sustained.

Renewed scrutiny over AI-associated costs arrives as expectations have ratcheted up regarding a possible interest rate hike this year. Futures markets peg the odds of an interest rate hike in September at about 52%, according to the CME Group's FedWatch Tool, a measure of investor sentiment.

Proponents say a lag between the buildout of AI infrastructure and an onrush of gains is to be expected, pointing to a similar lull after the introduction of other watershed technologies, such as the internet.