By Britney Nguyen

Analysts note high expectations, concerns about elevated Treasury yields and a potential letdown surrounding Anthropic's financial progress

Micron's stock was falling on Tuesday.

After staging a comeback recently, chip stocks stalled out on Tuesday as investors weighed economic developments as well as reports of new financial figures from a leading artificial-intelligence company.

Many of the S&P 500's SPX worst performers as of midday Tuesday were semiconductor or optical stocks - with Coherent (COHR), Ciena (CIEN) and Lumentum Holdings (LITE) pacing the decliners, each down at least 9%. Shares of Sandisk (SNDK) were off nearly 8% and shares of Micron Technology (MU) were down more than 6%.

Jefferies equities trading analyst Jeffrey Favuzza noted that the declines followed pressure on Asia-listed tech stocks and could relate to concerns about high Treasury yields.

Additionally, he noted that AI startup Anthropic's annual revenue run rate has reached more than $65 billion leading into its expected initial public offering, per a report from Bloomberg. That figure is "wildly impressive," Favuzza said, but it also "felt a bit light of" recent estimates.

Anthropic did not immediately respond to a request for comment from MarketWatch.

Other chip stocks were turning lower on Tuesday, with shares of Advanced Micro Devices (AMD) down 5.4%, Nvidia (NVDA) off 2.4% and Intel (INTC) falling 7.3%. Custom-chip makers Marvell Technology (MRVL) and Broadcom (AVGO) saw shares decline 8.4% and 2.9%, respectively.

David Wagner, head of equity at Aptus Capital Advisors, told MarketWatch in emailed comments that Tuesday's pullback could be a sign that investors have moved to cash in on some gains after AI hardware names had rallied in recent sessions.

Paul Meeks, head of technology research at Freedom Capital Markets, said memory companies have "sterling fundamentals," but bearish investors "are looking for the 'inevitable' collapse in commodity chip pricing."

In his view, the new long-term customer agreements being struck by Micron and Sandisk "should change the way one thinks about their suppliers," given that both companies have said floor pricing for the multiyear deals are guaranteed to be higher than peak pricing in previous memory booms.

Ion Jauregui, an analyst at ActivTrades, said that "given the magnitude of the recent gains, volatility and profit-taking should remain elevated" among high-beta technology stocks, which are those that are more volatile compared to the overall market.

Still, demand for memory and storage products is ongoing and rising rapidly, Jauregui said in emailed comments. In his estimation, investors are "becoming more confident that AI capital expenditures will remain strong," he said, and that should support the broader semiconductor trade.

Momentum among chip stocks is strong, but expectations are moving increasingly higher, he added. Therefore, while Jauregui "would remain bullish on the structural AI story," he said he would be cautious about short-term risks if expectations weaken.

-Britney Nguyen

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