The iShares Semiconductor ETF ended July down 22%, its worst monthly performance since December 2002, as concerns surrounding AI infrastructure spending, stretched valuations, Chinese competition, and higher interest rates weighed on the sector.
At the same time, many chipmakers continue reporting healthy demand, raising the question of whether the recent correction has become disconnected from underlying business fundamentals.
According to investor Prakhar Agarwal, the answer depends largely on which company investors are considering.
Looking first at Micron, Agarwal argues the recent sell-off reflects investor sentiment far more than any deterioration in the company’s underlying business. While the investor continues to view the memory industry as cyclical, he believes the market has become overly pessimistic after a pullback that was not accompanied by weakening customer agreements, softer hyperscaler spending, or deteriorating fundamentals.
“I would still hesitate to suggest a buy had the price decline been driven by factors directly affecting the company’s operations,” the investor explained. “However, the share price depreciation appears to have been driven largely by market sentiment.”
