Semiconductor stocks fall as AI trades unwind

Global semiconductor stocks tumbled on June 23, led by a sharp selloff in South Korea that quickly spread to the United States, as crowded trades unwound and macro pressures intensified.

South Korea rout triggers global decline

South Korea’s KOSPI Index plunged nearly 10%, repeatedly hitting circuit breakers as SK Hynix and Samsung Electronics both dropped more than 10%. The decline rippled across global markets, dragging the Philadelphia Semiconductor Index down 7.9%, with all 30 components closing in the red. Micron Technology led losses in the U.S., falling 13% after a strong rally earlier this year.

The selloff was widely described by analysts as a technical correction rather than a shift in the long-term outlook for artificial intelligence. Goldman Sachs data showed trading volumes remained near normal levels, but selling was concentrated in crowded long positions. Its basket of memory stocks fell 10%, while AI-related semiconductor holdings declined by 620 basis points.

Pressure builds from valuations and policy outlook

Underlying stress had been building. The Nasdaq has gained more than 30% since late March, while intraday swings in semiconductor stocks have intensified. In June, half of all trading sessions in the Philadelphia Semiconductor Index saw moves greater than plus or minus 5%.

At the same time, about 65% of U.S.-listed companies entered buyback blackout periods, removing a key source of demand that often stabilizes markets during declines.

Expectations of tighter monetary policy added to the pressure. The probability of a Federal Reserve rate hike in July rose to 50%, weighing on high-valuation technology names. Both long-only funds and hedge funds cut more than $1 billion in exposure, while short positions accounted for 60% of trading volume, above recent averages.

Seoul developments amplify selling

The initial shock in Korea was linked to multiple developments. Local reports said SK Hynix had slowed expansion of its HBM4 production, while lawmakers discussed a potential tax on unrealized gains. These factors triggered heavy selling, amplified by leveraged semiconductor ETFs popular among retail traders.

Foreign traders added to the pressure, offloading approximately 5.79 trillion won, or $3.8 billion, in a single session. The KOSPI’s 9.99% plunge illustrated how quickly leveraged and crowded positions can unravel.

Industry sources later suggested Hynix’s move was strategic, aimed at maximizing profits by focusing on tighter DRAM supply rather than signaling weak demand for AI memory chips.

Fragility beneath strong growth narrative

Despite the scale of the one-day drop, broader concerns center on structural fragility in the sector. Elevated valuations, concentrated positioning in AI-related themes, and reduced corporate buybacks have left markets vulnerable to sudden de-risking.

At the same time, longer-term forecasts remain strong. World Semiconductor Trade Statistics recently projected the global chip market will expand by nearly 90% in 2026, reaching $1.51 trillion, driven largely by data center demand and a projected 250% surge in memory.

Focus turns to Micron earnings and policy path

Attention is now shifting to Micron Technology’s earnings, expected after the closing bell. Consensus forecasts point to quarterly revenue of $35.59 billion and a record gross margin of 81.6%. Options markets are pricing in a 13% move in the stock following the results, reflecting elevated uncertainty.

Separately, expectations for monetary policy continue to evolve. Some analysts, including Bank of America, now forecast up to three rate hikes before the end of 2026, a notable shift from earlier expectations of easing.

Signs of stabilization emerge

Markets showed early signs of recovery after South Korea reported fresh supportive measures. Samsung Electronics is said to be planning a 90 trillion won ($65 billion) share buyback, while the government is considering accelerating construction of a new chip manufacturing cluster.

Following the news, the KOSPI rebounded, with semiconductor stocks leading gains, suggesting that while volatility remains high, underlying demand expectations have not collapsed.