The chip market faced a harsh reality check this summer as Intel and Micron shares tumbled sharply, dragging the semiconductor sector down and wiping out about $1.3 trillion from its market value at the lowest point. Meanwhile, other parts of the tech industry held relatively firm, highlighting a sector-specific shakeout.

From peak highs to sudden drops

Just a few months ago, the PHLX Semiconductor Index soared nearly 92% into early June 2026. The rapid ascent raised expectations for an ongoing AI-driven boom, but those hopes swiftly unraveled. The downturn began around June 4 when Broadcom’s AI chip sales forecast came in well below what Wall Street anticipated, igniting a cascade of selling pressure.

Intel and Micron shares both plunged over 7% immediately after Broadcom’s announcement. By July, Intel’s stock had fallen more than 20% from pre-rout levels. The chip index itself slid as much as 10.8%. Micron, in particular, exhibited extreme volatility, swinging in double-digit percentage losses repeatedly between June and July, pulling other memory chip makers like SK Hynix and Samsung down with it.

The AI investment puzzle

Central to the current nervousness is the projected $650 billion capital expenditure on AI infrastructure, representing a hefty 67% jump over last year. However, Broadcom’s muted forecast challenged the belief that such spending can deliver returns quickly enough to justify the sector’s lofty valuations. Rather than ending AI investments, the market appears to be recalibrating its expectations for growth and profitability.

At the same time, the chip selloff has rippled beyond the semiconductor niche. Risk aversion has spread to other markets, including cryptocurrencies like Bitcoin. Although no specific digital assets are directly linked to chip market moves, the broad technology selloff tends to spook investors in related fields. the GPUs that underpin AI training are also essential for various crypto mining and blockchain-based computational tasks. A downturn in AI hardware demand may alter the economics of these crypto operations, potentially affecting mining profitability and AI-related blockchain projects.