AI Chip Stocks Crater as Micron Sheds $138 Billion in a Single Day and the Great Semiconductor Trade Wobbles

The trade that carried Wall Street to record highs this spring went sharply into reverse, as artificial-intelligence chip stocks suffered one of their worst sessions in years and investors began openly questioning whether the sector's valuations had raced far ahead of reality.

Micron Technology led the rout, tumbling roughly 13% and erasing about $138 billion in market value in a single trading session — a staggering swing for a company that only weeks earlier had been a market darling. Intel and Advanced Micro Devices followed the memory maker lower, sliding about 9% and 7% respectively, while the closely watched VanEck Semiconductor ETF (SMH) shed around 5% after posting a record 71% gain in the second quarter. The reversal wiped out a chunk of the extraordinary gains that had defined the first half of 2026.

Several forces converged at once. Reports that South Korea's SK Hynix was slowing its expansion of high-bandwidth memory, or HBM — the specialized chips that feed AI accelerators — fanned worries that the frenzied buildout of AI data centers may be cooling. At the same time, a report that Meta Platforms is building a cloud business to sell off its excess AI computing capacity punctured one of the market's core assumptions: that demand for AI compute would always outstrip supply. "Meta's admission of excess capacity broke the premise that AI demand always outstripped supply," one market analysis noted.

Adding to the pressure is a shift in the macroeconomic backdrop. The Federal Reserve, now led by Chairman Kevin Warsh, has struck a notably more hawkish tone, tempering hopes for the aggressive rate cuts that had helped fuel the risk-on rally. Analysts at Bank of America have warned that elevated memory pricing could act as a kind of "tax" on the data-center spending that underpins the whole AI ecosystem, since memory accounts for roughly 35% of AI infrastructure costs.

Not everyone is convinced the boom is over. Micron itself recently reported blowout results — $41.5 billion in revenue with gross margins near 85% — and management has insisted memory demand will exceed supply well beyond 2027, pointing to 16 multiyear take-or-pay agreements worth some $22 billion in committed purchases. Bulls argue the selloff is a healthy shakeout rather than the end of the cycle.

Still, the sudden air pocket underscored how much of the market's 2026 advance has rested on a handful of chip names and the belief that AI spending would grow without limit. After years of extraordinary gains, investors are now doing something they had largely avoided: asking whether the numbers add up.