Major semiconductor stocks experienced significant declines in Thursday's trading, with SK Hynix leading losses at 6% to hit $187, following a three-day winning streak that saw the stock climb to a fresh peak of $191. Micron Technology slipped 4.20% to $982, while Advanced Micro Devices fell 3% to $504 and was on track to snap its three-day winning streak. Intel was also down 6.5% at $99.34, while Nvidia remained lower for the third consecutive day, slipping 2.6%. The recent decline comes amid extreme volatility in the semiconductor space, with traders using consecutive gains to book profits while sharp declines are seen as opportunities to buy on dips. The selloff comes despite strong AI infrastructure demand, with Sandisk shares declining 4% in Thursday's trade but remaining 8.5% higher so far in September.
Sandisk shares surged 11.90% to close at $1,740 on September 4, following exceptional fourth-quarter results that demonstrated the company's transformation into an AI infrastructure stock. The company reported revenue of $8.97 billion, up 51% from the prior quarter and 372% from a year earlier, with data-center sales reaching $2.98 billion, about a third of the quarter and more than double the prior period. Non-GAAP gross margin reached 84.6%, compared with 26.2% a year earlier, while adjusted earnings were reported well above year-ago losses. Management indicated that two-thirds of the sequential revenue increase came from higher prices and one-third from more bits shipped, with guidance projecting fiscal first-quarter 2027 revenue of $10.3-10.8 billion and non-GAAP profit of $44-46 per share. As per Piper Sandler, the rise of agentic artificial intelligence is making compute even more in demand than it was before, with the firm identifying two major players set to be winners amid the crunch.
The recent weakness in chip stocks comes amid escalating concerns over inflation and potential Federal Reserve policy changes. The latest US Producer Price Index (PPI) data for August came in hotter than expected, with the gauge rising 0.4% in August from the previous month and 5.4% from a year earlier, according to data released by the Bureau of Labor Statistics. Excluding food and energy, the gauge advanced 0.2% last month and 4.6% from a year earlier. This hotter-than-expected reading has further strengthened expectations of a Federal Reserve rate hike, with investors now turning their attention to the Federal Reserve's September 15-16 meeting. Some Fed officials have signalled that the rate decision could depend on what this week's inflation reports reveal. Adding to the pressure, oil markets have remained under strain over the past six months, with Brent crude rising above $105 a barrel in today's trade, while escalating attacks between the US and Iran in the Middle East have added concerns over energy supplies.
Despite the recent decline, JPMorgan initiated coverage on SK Hynix with an Overweight rating and a $245 price target, citing sustained demand for memory chips from the artificial intelligence industry. JPMorgan expects SK Hynix to deliver a 34% compound annual growth rate in earnings per share over the next two years, underscoring its bullish view on the company's growth prospects. The tumbled despite this positive analyst coverage, highlighting the extreme volatility currently affecting semiconductor stocks. On Wednesday, chip stocks had risen despite broader weakness on Wall Street, with SK Hynix, SanDisk, Micron Technology and AMD gaining as much as 5%.
The previous session's rally was driven by a bullish assessment from Goldman Sachs, which pointed to improving technical trends in Micron and SanDisk. Goldman said both Micron and SanDisk have broken out of the downtrends that had constrained their shares through the summer. Semiconductor volatility has also eased significantly from its July peak, suggesting the sector may be entering a more favourable phase for investors. This technical improvement had provided support for the previous day's gains, though the current session's decline suggests investors are taking profits following the recent rally.
