Shares of major semiconductor makers fell sharply on Tuesday as investors took profits after a powerful rally fueled by optimism around artificial intelligence infrastructure and demand for next-generation chips.
Intel (INTC) fell about 10% in trading after the stock more than doubled over the past month through Monday’s close.
Qualcomm lost more than 13%, while Advanced Micro Devices fell about 6%.
All three companies had reached all-time highs the day before.
The decline came after a surge in the semiconductor sector, with the iShares Semiconductor traded fund up 77% year to date as investors flocked to companies seen as beneficiaries of the AI boom.
Investors appeared to realize gains from the rally.
“While today’s market appears to be favoring directional momentum clearly favorable to Intel rather than final valuation, and foundry-related momentum has improved, we believe that potential good news is already more than adequately priced into Intel’s current stock price,” he said. writes Deutsche analyst Ross Seymore in a research note.
Some analysts have also pointed to signs of weakening demand in traditional IT markets.
Analysts at KeyBanc Capital Markets said laptop shipments fell 27% in April from the previous month, a development seen as negative for PC-focused chipmakers including Intel and AMD.
“We view lower-than-expected April shipments as negative for PC-exposed companies,†KeyBanc analyst John Vinh said in a research note.
Foundry Hopes Fuel Intel’s Rally
Intel has emerged as one of the industry’s top performers in recent months, with investors increasingly banking on the company’s efforts to rebuild itself as a major contract chipmaker.
The stock has more than tripled since late March on rumors that Apple could become a major foundry customer.
According to a Wall Street Journal report, Apple and Intel have reached a preliminary agreement under which Intel will manufacture certain chips used in Apple devices after more than a year of discussions.
Analysts at Bank of America estimate that such an opportunity could ultimately represent a market of 35 to 40 billion dollars.
Bank of America analyst Vivek Arya said Intel could potentially add more than $10 billion in annual revenue if it captures a significant share of that market.
However, the brokerage warned that profits would likely take years to materialize.
Intel would need significant investments in new factories, testing facilities and production infrastructure before substantial manufacturing volumes can begin, which could push out significant revenue gains until 2028 or beyond.
Bank of America raised its price target for Intel stock to $96 from $56, but maintained an “Underperform” rating as the target remains below the company’s current price.
Qualcomm broadens its growth profile
Qualcomm’s rally in recent weeks has been fueled by optimism that the company is becoming less reliant on the smartphone market and expanding into new growth areas, including automotive technology, wearables and AI-driven computing.
The stock had climbed 41% over the previous five sessions before Tuesday’s decline, marking its best five-day period since 2019.
In late April, Qualcomm reported better-than-expected quarterly results, and investors reacted positively to the company’s advances in data center processors.
Chief Executive Cristiano Amon said during an earnings call that Qualcomm expects to begin shipping a dedicated data center chip to a major hyperscale cloud customer in the December quarter.
“It’s a big hyperscaler and we’re definitely looking at a multi-generational partnership, but I think that’s all we can say at the moment,” Cristiano Amon told analysts.
Despite the recent rally, Wall Street remains cautious about Qualcomm’s valuation.
According to FactSet data, the average analyst rating for the stock remains “Hold,” with the stock trading well above the consensus price target.
