What Happened?
A number of stocks fell in the afternoon session after the semiconductor sector pulled back amid fears that AI-driven chip demand may be cooling.
The broader Philadelphia Semiconductor Index plunged over 7%, dragging down chipmakers. The negative sentiment was amplified by a warning from a Citi analyst who questioned whether large cloud platforms would continue their high rate of spending on AI infrastructure if they could not show investors the cost was generating returns.
Additionally, reports of Meta's plan to sell access to its AI computing power sparked fears of future overcapacity in the industry. For two years the sector traded on an assumption of an insatiable GPU and memory shortage. If Meta, which guided to as much as $145 billion of capex for the year, has enough spare capacity to lease it out, the market reads that as a signal hyperscalers may have over-built, meaning future orders for GPUs, HBM and NAND could shrink.
A secondary catalyst pressured the Koreans specifically: reports that Apple was in talks to source chips from two Chinese suppliers, raising competitive and pricing fears. Underlying all of it is profit-taking.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks.
Among others, the following stocks were impacted:
- Semiconductor Manufacturing company KLA Corporation (NASDAQ: KLAC) fell 14%. Is now the time to buy KLA Corporation? Access our full analysis report here, it’s free.
- Semiconductor Manufacturing company Teradyne (NASDAQ: TER) fell 15.2%. Is now the time to buy Teradyne? Access our full analysis report here, it’s free.
Zooming In On Teradyne (TER)
Teradyne’s shares are extremely volatile and have had 43 moves greater than 5% over the last year. But moves this big are rare even for Teradyne and indicate this news significantly impacted the market’s perception of the business.
The previous big move we wrote about was 3 days ago when the stock gained 6.6% on the news that several analysts raised their price targets on the stock, citing strong demand fueled by the artificial intelligence (AI) sector.
Cantor Fitzgerald increased its price target to $550 from $400, while BofA raised its target to $525 from $365, with both firms maintaining positive ratings. Analysts see the AI infrastructure buildout as a long-lasting semiconductor cycle. The bullish sentiment follows a recent surge in Teradyne's stock after a major customer, Micron, reported a record quarter.
Micron produces high-bandwidth memory (HBM), which is crucial for AI and requires significantly more testing than standard memory chips. When Micron reported strong results and provided a much higher revenue forecast, investors anticipated that orders for Teradyne's test equipment would also increase.
Teradyne is up 76% since the beginning of the year, but at $365.23 per share, it is still trading 12.6% below its 52-week high of $418.08 from April 2026. Investors who bought $1,000 worth of Teradyne’s shares 5 years ago would now be looking at an investment worth $2,842.
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