Semiconductor ETF falls 12.8% in worst session since March 2020

Key Facts

The iShares Semiconductor ETF (SOXX) fell 12.8% in the November 5 session, its biggest daily decline since March 2020, according to data reported by Benzinga. The fund closed at $131.9, according to EL7 data. The drop came amid a broad selloff in chip stocks and U.S. equities generally. By the end of the session, 28 of the 30 companies held by the fund were trading at least 20% below their record closing highs. Fifteen companies had also lost more than half their value from their peaks, underscoring the breadth of the decline across the fund’s holdings.

The decline extended to the broader sector index, with the Philadelphia Semiconductor Index (SOX) falling 12.3% in its worst session since March 16, 2020, according to Benzinga. The Nasdaq 100 lost 6.4% the same day, also marking its worst performance since March 2020. Losses among major stocks varied as they entered the session at different distances from their peaks. Micron fell 17.5%, leaving it 46% below its highest close, reached in June. AMD dropped 17.3%, leaving it 38% below its October peak, while NVIDIA was 24% below its record close.

Losses were concentrated among the fund’s largest holdings. Its four biggest positions—AMD, NVIDIA, Broadcom and Micron—account for about one-third of its assets, and all four stocks were in bear-market territory, according to Benzinga. The 28 companies that had fallen 20% or more from their closing highs make up about 90% of SOXX’s assets. That means the decline was not confined to a handful of smaller or lower-weight names, but affected most of the exposure investors get through the fund. Among SOXX’s holdings, only Texas Instruments and Analog Devices had not entered bear-market territory, according to the report’s tally. The breadth of the losses has placed the sector’s largest companies in the same downturn as the rest of its holdings.

The selloff began after Qualcomm and Arm reported disappointing results following Wednesday’s close, then spread to other companies in the sector, according to Benzinga. Reuters quoted Nationwide’s chief market strategist as saying investors attributed the decline to the companies’ weak results and the possibility that the election could slow the pace of AI infrastructure construction. The strategist said, "What’s being blamed is the weak results from Qualcomm and Arm; it was a reminder that fundamentals still matter, and the election could put a ceiling on the pace of AI infrastructure construction." A Cantor Fitzgerald analyst said Qualcomm’s December-quarter outlook implies a margin of about negative 15% for its new data-center unit. These signals came as investors monitored chipmakers’ ability to turn AI-related demand into financial results.

Chip stocks fell alongside steep declines across the broader U.S. market. The S&P 500 fell 4.4% to 7,353.73 points, the Dow Jones dropped 3.4% to 51,523.06 points, and the Nasdaq Composite declined 5.5% to 24,315 points, according to the Associated Press. The November 5 losses erased more than the U.S. market’s gains from the previous day, when it posted its best performance in three months. NVIDIA fell 9.3%, according to AP, while AMD dropped 17.3%. The moves put technology stocks and major indexes under simultaneous pressure in a single session.

AI stocks had been on a series of declines in the month after the Nasdaq closed at a record on October 6, according to Reuters. During the November 5 session, the SOX index fell as much as 11% in intraday trading, according to a report published during the session, before Benzinga reported its closing decline of 12.3%. Concerns about borrowing costs and elevated AI stock valuations preceded the selloff, according to AP. The agency said that slower construction of AI data centers could reduce chip purchases because the expansion of these centers is tied to demand for those components. Concerns about company results and the possibility of slower infrastructure spending thus converged with the broader market’s decline in the session.