A sharp selloff in semiconductor stocks has prompted a growing number of Wall Street analysts to argue that the recent weakness may offer an attractive buying opportunity, although some caution that the sector could face further declines before a sustained recovery begins, according to research notes published on July 20.
Morgan Stanley analyst Joseph Moore said the recent pullback in U.S. memory-chip stocks has created compelling entry points for investors.
“The recent selloff in memory stocks provides an attractive opportunity,” Moore wrote. While he continues to view computing leaders such as Nvidia Corp. and Broadcom Inc. as the sector’s most attractive investments, he said falling valuations have quickly improved the appeal of memory-chip makers.
The correction followed one of the industry’s weakest weeks in more than a year.
The VanEck Semiconductor ETF (SMH) declined 8.9% last week, its steepest weekly drop since April 2025, when it fell about 15%. The Philadelphia Semiconductor Index (SOX) lost roughly 10% over the same period.
Investor sentiment has been pressured by concerns that increasingly advanced artificial intelligence models could accelerate consolidation across the software industry, raising questions about future technology spending.
Several analysts, however, argue that the long-term outlook for semiconductor hardware remains intact. They point to resilient AI infrastructure investment and persistent shortages of high-bandwidth memory and other advanced chips as evidence that industry fundamentals continue to support demand.
Mizuho analyst Vijay Rakesh said AI-related capital expenditures and investments in gigawatt-scale power infrastructure are expected to continue expanding through at least 2028 and 2029, providing a durable growth driver for semiconductor demand.
“AI capital spending remains robust, and supply shortages are still significant,” Rakesh wrote.
Shares of Nvidia and Broadcom have fallen about 4% and 10%, respectively, over the past month. Even so, several strategists said those declines do not indicate the start of a prolonged downturn.
J.P. Morgan strategist Mislav Matejka said semiconductor stocks are likely to regain investor interest because meaningful additions to industry supply are unlikely before 2028.
“Industry fundamentals remain constructive,” Matejka wrote, adding that investors may be moving too quickly to price in a cyclical peak.
Not all firms are convinced the correction has reached its end.
Evercore ISI characterized the nearly 20% decline in the Philadelphia Semiconductor Index over the past four weeks as a typical mid-cycle correction rather than a sign of weakening fundamentals. Still, the firm expects additional downside before the sector establishes a durable bottom.
Evercore analyst Mark Lipacis said semiconductor stocks could fall another 10% to 15% over the next two to three weeks before the correction is complete
Historically, the Philadelphia Semiconductor Index has delivered a median gain of approximately 36% during the 20 weeks following comparable mid-cycle corrections, suggesting that while near-term volatility may persist, long-term investors could benefit once the sector stabilizes.
