Shares of major semiconductor companies retreated sharply on Tuesday as investors locked in gains following a powerful rally driven by optimism around artificial intelligence infrastructure and next-generation chip demand.
Intel (INTC) fell about 10% in trading after the stock more than doubled over the past month through Monday’s close.
Qualcomm dropped over 13%, while Advanced Micro Devices declined around 6%.
All three companies had reached record highs a day earlier.
The pullback came after a blistering run across the semiconductor sector, with the iShares Semiconductor exchange-traded fund rising 77% this year as investors poured money into companies seen as beneficiaries of the AI boom.
Investors appeared to have booked profits from the rally.
“While today’s market seems to value directional momentum clearly positive for Intel over destination valuation, and foundry-based momentum has improved, we believe the potential good news is more than adequately reflected in Intel’s current share price,” Deutsche analyst Ross Seymore wrote in a research note.
Some analysts also pointed to signs of weakening demand in traditional computing markets.
Analysts at KeyBanc Capital Markets said notebook computer shipments fell 27% in April compared with the previous month, a development viewed negatively for PC-focused chipmakers including Intel and AMD.
“We view April shipments below our expectations as negative for PC-exposed companies,” KeyBanc analyst John Vinh said in a research note.
Foundry hopes drive Intel rally
Intel has emerged as one of the strongest performers in the sector in recent months as investors increasingly bet on the company’s efforts to rebuild itself into a major contract chip manufacturer.
The stock has more than tripled since late March amid reports that Apple could become a significant foundry customer.
According to a report by The Wall Street Journal, Apple and Intel have reached a preliminary agreement under which Intel would manufacture some chips used in Apple devices after more than a year of discussions.
Analysts at Bank of America estimated that such an opportunity could eventually represent a $35 billion to $40 billion market.
Bank of America analyst Vivek Arya said Intel could potentially add more than $10 billion in annual revenue if it captures a meaningful share of that business.
However, the brokerage cautioned that the benefits would likely take years to materialise.
Intel would need significant investments in new factories, testing facilities, and production infrastructure before meaningful manufacturing volumes could begin, potentially delaying major revenue gains until 2028 or later.
Bank of America raised its price target on Intel shares to $96 from $56 but maintained an “Underperform” rating because the target still sits below the company’s current share price.
Qualcomm broadens growth story
Qualcomm’s rally in recent weeks has been driven by optimism that the company is becoming less dependent on the smartphone market and expanding into new growth areas, including automotive technology, internet-connected devices, and AI-focused computing.
The stock had climbed 41% over the previous five trading sessions before Tuesday’s decline, marking its strongest five-day stretch since 2019.
At the end of April, Qualcomm reported stronger-than-expected quarterly earnings, while investors reacted positively to updates on the company’s push into data-centre processors.
Chief Executive Officer Cristiano Amon said during an earnings call that Qualcomm expects to begin shipping a custom data-centre chip to a major hyperscale cloud customer in the December quarter.
“It is a large hyperscaler and we’re really thinking about a multi-generation engagement, but I think that’s what we can say at this point,” Cristiano Amon told analysts.
Despite the recent rally, Wall Street remains cautious on Qualcomm’s valuation.
According to FactSet data, the average analyst rating on the stock remains “Hold,” with shares trading well above the consensus target price.
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