Semiconductor stocks opened the third quarter on a weak note on Thursday, with several of the biggest winners from the AI rally witnessing sharp profit booking after a record-breaking run in the April-June period. The VanEck Semiconductor ETF (SMH), which tracks major chip stocks, fell more than 5%, a day after ending its strongest quarter on record. The index had surged 71% between April and June as investors aggressively bought companies expected to benefit from the artificial intelligence boom.Memory chip maker Micron led the losses, tumbling 11%, while Intel fell 9% and Advanced Micro Devices (AMD) declined 7%.The three companies together had added nearly $2 trillion in market value during the second quarter as investors broadened their AI bets beyond Nvidia, expecting rising demand for memory chips and central processors to support future growth.Selling pressure also spread to semiconductor equipment makers. Lam Research, KLA Corp. and Applied Materials, all of which more than doubled during the second quarter, fell at least 10%.The weakness came after reports suggested that Meta Platforms may rent out excess AI computing capacity, raising concerns that the rapid expansion of AI infrastructure could eventually lead to excess supply.The report fuelled speculation that AI computing capacity may be catching up with demand, prompting investors to reassess lofty valuations across the semiconductor sector.Interestingly, Meta's shares moved in the opposite direction, rising more than 9% after the development was viewed positively by investors. The company is among the largest spenders on AI infrastructure globally, investing billions of dollars annually in data centres and computing hardware.Analysts at KeyBanc Capital Markets said the move could help Meta expand into the enterprise AI market and generate quicker returns from its infrastructure investments.Despite Wednesday's sell-off, many market participants continue to remain constructive on large technology companies investing heavily in AI.Richard Saperstein, chief investment officer at Treasury Partners, said he continues to favour hyperscalers, arguing that their earnings growth remains strong even as valuations have moderated due to concerns over heavy capital expenditure.The sharp reversal highlights growing volatility in AI-related stocks after an extraordinary rally, with investors becoming increasingly selective as they look for clearer evidence that massive investments in AI infrastructure will translate into sustainable earnings growth.