Why do Semiconductor stocks keep falling even though fundamentals remain strong?!Here's why:TLDR; The Semiconductor indu…

Why do Semiconductor stocks keep falling even though fundamentals remain strong?!

Here's why:

TLDR; The Semiconductor industry consumes a massive 20% of the total risk capital in the global equity markets.

The current share of risk capital for the Tech sector in the broader Global MSCI ACWI index is 40% vs. its 28% market cap weight. Of this, Semiconductors account for 20% vs. their 13% market cap weight.

Semis' market cap weight has risen rapidly in 2026 and because they're more volatile than the broader market, their share of risk runs well ahead of that weight. Therefore, investors are far more exposed to the Semis industry than even the index weights suggest.

This concentration then changes how the entire sector trades, where most of these selloffs are positioning events - not fundamental-driven.

Steady inflows into equities and thin net equity supply have kept realised vol low. Funds that size positions off VaR or vol-targeted risk budgets respond to low vol by running bigger gross exposure. When vol picks up, the same models force them to cut positions.

Then like a snowball rolling down a hill...that selling lifts vol further which forces the next round of cuts. (It works the opposite way too).

So with ~20% of the global risk budget sitting in Semis, these stocks are the first thing sold whenever risk models flag any shocks...even if fundamentals remain robust.

Data: JPM Global Markets Strategy