The PHLX Semiconductor Sector Index (SOX) has outperformed the Nasdaq 100 over the course of the year. While the broader technology index is one fifth ahead, the SOX has gained almost 28%, although the swings are also significantly larger than in the Nasdaq.

During the global price turbulence in July and August, the SOX fell by a quarter within two weeks, while the Nasdaq „only“ fell by 12%. The SOX also recently lost a disproportionate amount of 5.3% in a single day of trading. The increased volatility of the semiconductor sector is mainly due to the swings in AI related euphoria. A tightening of the US export regulations for AI chips causes uncertainty from time to time, which primarily affects shooting star Nvidia, but it is general doubts about AI as a growth engine that can have more impact across the board. The price of ASML shares, whose chip manufacturing technology is used by firms such as Intel, AMD and Samsung, has fallen heavily since mid-October.

Their need for ASML machines is naturally influenced by overall chip demand, where AI has not yet taken off everywhere. While Nvidia is in a league of its own, AI has not yet had a major impact on the PC market, on which Intel and AMD, among others, are heavily dependent. Sales fell again globally in the past quarter, according to figures from Gartner, because customers do not yet see any particular benefit in AI chips in PCs, which is dampening demand. The market researcher does not expect a recovery until 2025.

It is not clear whether all sector stocks will benefit equally from this. Intel and AMD have fallen behind due to the x86 architecture they use, which has disadvantages compared to Arm's blueprints, due to higher power consumption. Arm chips already dominate in smartphones, and are also used by Apple on the Mac. AMD and Intel now want to join forces with PC manufacturers. The success of the alliance remains to be seen.