Chip Stocks Are 38% Off Their Peak: 'Time to Buy the Dip,' Analysts Say
Piero Cingari 53 minutes ago
TechAnalyst ColorEquities
Cantor Fitzgerald and HSBC say the chip stock selloff is overdone, with the SOX at 9x 2028 earnings. Top picks include NVDA, MU, SNDK, ASML and AMAT.
Last week, the PHLX Semiconductor Index lost 12.1%, its worst week since the tariff shock of April 2025.
By Thursday’s close, the index sat 38.4% below its June 22 record. Many individual stocks had fallen much further.
On Monday, two Wall Street banks said it was time to start buying.
“It’s officially time to get your shopping lists ready,” Cantor Fitzgerald analysts led by C.J. Muse said in a note Monday, calling the selloff “a mid-cycle correction.”
HSBC agreed. “Recent moves in equities have been vicious, and in our view, overdone,” Alastair Pinder, HSBC head of emerging-market and global equity strategy, said in a separate note.
The Average Chip Stock Is Down 55%
The SOX leans heavily on Nvidia Corp. (NASDAQ:NVDA) and Broadcom Inc. (NASDAQ:AVGO), which have held up better than most. The median stock in Cantor’s coverage is down 55% from its 2026 peak.
Memory was hit hardest.
As of Thursday’s close, Sandisk Corp. (NASDAQ:SNDK) was down 65% and Western Digital Corp. (NASDAQ:WDC) 64%. Applied Materials Inc. (NASDAQ:AMAT), KLA Corp. (NASDAQ:KLAC) and Lam Research Corp. (NASDAQ:LRCX) were each down 56% to 57%.
Still, the SOX remains up 28.8% this year, after Friday’s 4.2% rebound.
| Segment | Drop from 2026 peak | P/E on 2028 estimates |
|---|---|---|
| Memory & Storage | -57% | 3x |
| Small/Mid-Cap Equipment | -56% | 12x |
| Large-Cap Equipment | -56% | 15x |
| Compute & Networking | -39% | 11x |
| Analog & Foundry | -32% | 12x |
| SOX Index | -38% | 9x |
Read Also: Chip Stocks Are Now Cheaper Than the S&P 500 — Something Unseen During the Entire AI Boom
The Midterms Turned AI Worries Into a Washout
Cantor said the slide since June comes down to one question: can the AI infrastructure buildout last?
Slower revenue growth at frontier AI labs fed other worries, from debt-funded cloud spending to circular deals in which suppliers invest in their customers.
The midterms added a new layer. Democratic winners in states such as Texas and Ohio have backed tighter data center rules, including moratoriums.
HSBC estimates 80% of the 310 gigawatts of planned or under-construction US data center capacity now sits in states with Democratic governors, up from 35% before the vote. Texas alone is expected to host 25% to 30% of upcoming gigawatt-scale sites, according to Cantor.
Leveraged ETFs Made It Worse
Because leveraged ETFs reset exposure daily, they sell into falling markets.
On Nov. 5, when the SOX fell 12.2%, HSBC estimates these funds were forced to sell almost $48 billion of stock. Nvidia absorbed about $3.9 billion, Micron Technology Inc. (NASDAQ:MU) $2.7 billion and Apple Inc. (NASDAQ:AAPL) $2.5 billion.
Read Also: Chip Stocks Just Had Their Worst Day Since 2020: 28 of 30 Biggest Names Are in a Bear Market
Both Banks Say Fears Are Overdone
Cantor said compute remains sold out, lead times keep lengthening and visibility stretches into 2028.
AI spending is also now a core engine of US growth. Without it, “we will be in a recession in the US,” Cantor said.
HSBC expects states to make data center owners pay more toward electricity costs rather than turn projects away. Delays are possible, Pinder said, but derailment looks unrealistic.
Cantor added that modest delays could even extend the cycle. Equipment makers’ median forward multiple has collapsed from about 47 times to 19 times, even as estimates rose.
Walmart Is Pricier Than Nvidia
HSBC said US semiconductors trade at 13.5 times forward earnings after their multiple shrank 45% since June.
Meanwhile, Walmart Inc. (NASDAQ:WMT) trades at 40 times, near a record high, while Nvidia sits at 13 times, near a record low.
“We would buy the dip in tech,” Pinder said.
Cantor’s Shopping List
Cantor’s top picks include Micron, Sandisk, Nvidia, Broadcom, Advanced Micro Devices Inc. (NASDAQ:AMD), ASML Holding N.V. (NASDAQ:ASML), Applied Materials, Lam Research and KLA.
Sandisk trades at 2.6 times 2028 earnings. Cantor estimates about $82 billion in free cash flow through 2028, more than 72% of its market value, and sets a $2,200 target versus Friday’s $835 close.
Nvidia faces a fresh test. Shares were down about 5.6% premarket Monday after its board opened an independent investigation into a reported foreign intelligence effort targeting CEO Jensen Huang.
What Could Clear the Air
Cantor said cheap multiples on cyclical earnings can become value traps, and that valuation alone may not lift the stocks.
HSBC named one catalyst: Anthropic’s IPO. Polymarket odds of a listing before 2027 briefly fell from 90% to 70% last week before recovering, according to HSBC.
The midterms didn’t clear the air. The market is still waiting for something that will.
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