A recent sell-off in high-flying chipmakers and momentum stocks is being viewed by Wall Street as an orderly unwinding of profits rather than a fundamental flaw in the artificial intelligence boom.
- The iShares MSCI USA Momentum Factor ETF (MTUM) slipped into formal correction territory before stabilizing and ticking upward during early trading.
- Trading desks at major firms like Goldman Sachs and UBS report an absence of widespread panic.
- JPMorgan analysts indicated that the momentum-driven sell-off may have hit its floor, prompting investors to view the lower prices as a buying opportunity
High-flying momentum and semiconductor stocks slumped into correction territory on Wednesday for a brief moment, but Wall Street insiders are signaling that the downturn is driven by aggressive profit-taking rather than a structural decline in demand for artificial intelligence.
The sharp pullback, which saw major chipmakers decline over the past week, culminated on Wednesday morning as the iShares MSCI USA Momentum Factor ETF (MTUM) dipped 10% below its recent peak at the market open, CNBC reported. However, the index quickly rebounded, trading up 0.6% at the time of writing.
Micron (MU), Advanced Micro Devices (AMD), Broadcom (AVGO), Intel (INTC), and Lam Research (LRCX) are among the top constituents of the MTUM ETF, making it a barometer for semiconductor and momentum stocks.
Top Wall Street Firms See No Panic In AI Trade
Despite the rapid slide in tech valuations, major institutional trading desks report a calm environment devoid of panic selling. Analysts suggest that the core fundamentals of the semiconductor industry, particularly in memory chips, remain robust.
"While momentum is clearly getting wrung out, the broader AI infrastructure narrative doesn't look like it's cracking," UBS traders noted in a memo to clients, which was accessed by CNBC. The firm characterized the market movement as an "orderly de-risking exercise" instead of a forced market liquidation.
Goldman Sachs echoed that sentiment, noting that its trading desk has yet to witness panic mode despite the substantial magnitude of the recent sell-off.
JP Morgan Suggests To Buy The Dip
With the fundamentals behind AI investments remaining intact, some prominent financial institutions are urging investors to capitalize on the lower stock prices.
"Was yesterday the bottom? We think you buy the dip," JPMorgan traders stated, suggesting that the momentum-driven unwind may have run its course.
Investors appeared to heed that advice as the trading session progressed. Broadcom shares jumped 6% by midday, while Micron overcame early session volatility to trade in positive territory alongside most major chip manufacturers.
Upcoming Catalysts
South Korean memory giant SK Hynix is scheduled to list 18 million new common shares in its upcoming listing, with the ratio set at 10 American Depositary Receipts (ADRs) per common share in an effort to raise roughly $30 billion. Analysts at UBS noted that the massive listing, combined with a high-performance bar for upcoming corporate earnings, will likely serve as the market's next directional catalyst.
NVDA, AVGO, MU, INTC Stock: Retail View
Retail sentiment on NVDA and MU was ‘bullish,’ while AVGO and INTC were ‘neutral’. Retail chatter has jumped the most on AVGO stock, up 110% over the last session, while chatter on INTC and NVDA stock gained 10% and 30%, respectively.
The Philadelphia Semiconductor Index (SOX) and the iShares Semiconductor ETF (SOXX) jumped 2%.
NVDA stock gained 8% year-to-date, AVGO rose 12%, and MU soared 235% during the same period.
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