Why high-flying chip stocks are suddenly looking vulnerable

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• High-flying chip stocks have been battered in recent trading sessions.
• A blurry rate outlook and profit-taking after months of gains are weighing on the space.
• An investor said that structural forces in the market have also pushed chips lower.

The AI picks-and-shovels trade has stumbled in the last few days after a long stretch of record-setting gains, and the market's hottest stocks are suddenly looking vulnerable.

Chip shares have plunged in three of the last four trading sessions, with losses on Tuesday and Wednesday' extending last Friday's steep decline.

Volatility kicked off last Thursday after after Broadcom reported disappointing earnings, but really picked steam on Friday when a hot jobs report officially dashed all hope for a rate cut in 2026.

The VanEck Semiconductor ETF is down 10% in the last five days, and major names from GPU makers to memory chip firms are taking a beating.

Here are some the biggest declines since the close on Thursday, June 4:

• Advanced Micro Devices -14%
• Intel -6%
• Nvidia -8%
• Micron Technology -11%
• Broadcom -11%
• Marvell Technology -20%

What goes up….

Finance pros say that the stunning rally to records for the chip sector has made it particularly vulnerable to and shifts in the wind when it comes to bullishness on the broader market or the AI trade specifically.

"Chip stocks were the dominant driver of S&P 500 returns, which itself became a vulnerability," Giuseppe Sette, president and co-founder of AI investment platform Reflexivity stated. "Concentrated ownership, stretched valuations, and sky-high expectations left little room for error."

A few things have weighed on sentiment lately, chief among them the changes in rate views in light of a strong labor market and hot inflation. The two data points—nonfarm payrolls last Friday, and the May consumer price index on Tuesday—leave little to no room for the Fed to cut interest rates, crushing hopes for one of the most bullish scenarios investors were eyeing earlier in 2026.

Raising liquidity for mega-deals?

Some market pros have said that the sell-off that's rocked tech and the broader market since late last week could also be investors position to raise capital ahead of major IPOs expected this year, the first of which will land this week from SpaceX.

"I think the reason stocks are going down is that everyone is so focused on the SpaceX IPO and how to position it that they're not doing work on other names," Michael Monaghan, a portfolio manager at Founder ETFs, told Business Insider's Naomi Buchanan this week.

Chris Versace, senior portfolio manager of TheStreet Pro Portfolio, also attributes part of the recent chip sell-off to some profit taking from investors that followed the sector's significant run up.

Alexander Wah, founder and CIO of Prince Capital investment firm, told Business Insider that his firm moved to trim some positions prior to June in anticipation of a sell-off due to the massive rally in A-adjactent names.

"Over the past year or so we have had an increasingly challenging macro backdrop while at the same time a huge revolution in technology that has propelled chip stocks (historically a risk asset sensitive to macro) upwards," he said. "I don't view chip stocks as vulnerable as much as I think people are taking gains and risking off right now."

Sette maintains, though, that the sector was extremely vulnerable, highlighting not just valuation concerns, but also unresolved AI chip export matters with China and interest-rate sensitivity.

"The selloff wasn't random," he noted. "It was the product of several structural fragilities that had been building throughout the rally."

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