“They have definitely lost some momentum," said King Lip, chief investment strategist at Baker Avenue Wealth Management. “Many of these chip names got that AI boost. Some of that fervor has kind of simmered down.”
As the stocks rose this year, so did valuations. At the end of July, the 21-stock S&P 500 semiconductors and semiconductors equipment industry group was trading at 28.5 times forward 12-month earnings estimates, compared to its 10-year average P/E of 16.5 times, according to LSEG Datastream."Coming out of the pandemic and with this rise in popularity and race for AI-related innovation, that created a tailwind for semiconductor stocks," said Kevin Mahn, president and chief investment officer at Hennion & Walsh Asset Management.
With "some of the names that really have catapulted to the top, now you are starting to question valuations,” Mahn said.Valuations are coming under further pressure from the rise in Treasury yields. Higher yields on Treasuries - which are seen as virtually risk free - offer investment competition to equities, viewed as a riskier asset class.
Yields jumped on Wednesday, with two-year yields hitting 17-year highs, after the Federal Reserve signaled a policy of interest rates stayingNvidia's recent weakness has come even after it far exceeded expectations with its revenue forecast when it