Have Chip Stocks Fallen Enough to Create an "Opportunity"? Institutions Pour Cold Water: AI Trades Remain Crowded, Not Yet Time to Buy the Dip
Complete. Here is the key summaryGlobal chip stocks have faced sell-offs, with fund managers warning that AI trades are crowded and it is not yet time to buy the dip. Although short-term volatility has been amplified by low trading volumes, the long-term investment logic for AI remains unchanged. Investors are advised to reduce their positions and wait for better opportunities, while keeping an eye on the upcoming earnings reports of tech giants to gauge the sustainability of AI demand
Global chip stocks have once again faced sell-offs, but fund managers warn that it is still too early to buy the dip.
On July 28, Paul Markham, Head of Global Equities at GAM, stated that market funds remain highly concentrated in AI and tech stocks. "There are indeed too many people on the same side," implying that crowded trades have not yet fully unwound, and sector adjustments may not be over. He suggested that investors maintain their exposure to tech stocks but appropriately reduce their positions to wait for better opportunities to add.
The semiconductor sector saw its declines widen further on Tuesday. On one hand, investors began to reassess whether the AI investment boom can support the current high valuations of the sector; on the other hand, growing concerns about changes in the industry's competitive landscape further intensified selling pressure on chip stocks. Under the combined pressure of valuation concerns and weakening sentiment, the global semiconductor sector declined.
However, Markham believes that short-term volatility has not changed the long-term investment logic of the AI industry. He noted that the fundamentals of some AI-related companies, such as SK Hynix, remain solid. As profit margins continue to improve and product pricing power strengthens, the market still has reasons to assign higher valuations to these companies.
Low Trading Volume Amplifies Market Volatility, Earnings Season Becomes Key Catalyst
Markham pointed out that the quiet summer trading season and shrinking volume are important backgrounds for the current increase in market volatility. Decreased liquidity has accelerated capital rotation, thereby further amplifying price fluctuations, which do not fully reflect the true changes in corporate fundamentals.
He expects the market may enter a period of "pause and adjustment," with the recovery of this year's upward momentum possibly occurring later. This means that chip stocks may still lack clear support in the short term, and investors need to wait for further repair in market sentiment and capital conditions.
As chip stocks face pressure, market attention is turning to the upcoming tech industry earnings season. The capital expenditure plans of Meta and Amazon will become an important window for observing the AI investment cycle. Related disclosures will not only affect judgments on the sustainability of AI demand but may also reshape investor expectations for the prospects of the semiconductor industry.
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