Wall Street’s favorite bet falters as chip stocks whipsaw the market

For most of 2026, betting on chip stocks felt less like investing and more like printing money. The Philadelphia Semiconductor Index, known as the SOX, had gained over 100% in the first half of the year alone, powered almost entirely by the market’s collective conviction that AI would need silicon in quantities the world had never seen before. Then came the unraveling. By July, semiconductor stocks had slipped into bear market territory, with the SOX logging single-session declines of roughly 5 to 6%. The AI trade, once the most celebrated position on Wall Street, started to look a lot like a crowded elevator with a snapped cable. How a $1.3 trillion wipeout happens The damage started accumulating in early June, when the sector shed approximately $1.3 trillion in combined market value over a short stretch of sessions. To put that in perspective, that is roughly the GDP of Spain, gone from a single corner of the equity market in a matter of weeks. Nvidia, the face of the AI chip boom, retreated around 2.5% during the sell-off. Broadcom’s situation was more acute, with the company facing significant guidance challenges that spooked investors who had priced in nothing short of perfect...