Semiconductor Stocks Suffer Worst Week in Years as Kospi Falls 25% From Its Peak

Meta description: The Philadelphia Semiconductor Index fell 10% in a single week, Taiwan entered correction territory, and Korea's Kospi is now down 25% from its June high. Here's what's driving the global chip selloff.

What began as a bout of AI-spending jitters earlier this month has snowballed into one of the roughest stretches for chip stocks in recent memory. Over the past week, the Philadelphia Semiconductor Index fell a full 10%, Taiwanese equities slipped into correction territory, and South Korea's Kospi — long a proxy for global memory-chip sentiment — is now down roughly 25% from its June peak.

A selloff that started in Asia and spread West

The pullback began overnight in Asian trading before spreading to US markets, underscoring just how globally interconnected the semiconductor supply chain — and semiconductor sentiment — has become. European stocks, with comparatively lower exposure to the tech sector, held up noticeably better throughout the rout, highlighting how concentrated this particular selloff has been in chip-heavy indexes specifically rather than equities broadly.

Profit-taking after a historic run

Context matters here. Heading into this pullback, the sector had just posted its best quarter on record, with a key semiconductor benchmark gaining 88% in the second quarter alone. That kind of run naturally invites profit-taking, and much of the current selloff appears to reflect investors locking in gains rather than a fundamental reassessment of AI chip demand. Still, the speed and depth of the reversal — particularly in Korea, where the Kospi's 25% drawdown from its peak now qualifies as a full bear-market-style correction for the index — has caught many investors off guard.

Competitive pressure adds a new wrinkle

Adding to the unease, news that a Chinese AI lab released a large language model appearing to rival top US systems at a fraction of the cost has stoked fresh worries about whether the enormous capital spending underpinning AI infrastructure buildouts can be justified if cheaper competitive alternatives keep emerging. (More on that story in our next post.) That development landed at a particularly sensitive moment, compounding existing anxiety about AI capex returns following mixed reactions to recent megacap earnings reports.

A bounce, but questions remain

There was a bright spot Monday: as oil prices sank on news of a US-Iran pause in hostilities, Asian markets broadly rallied, with the Kospi adding nearly 1% and the Kosdaq surging more than 2%. Whether that relief extends into a sustained recovery for chip stocks specifically, or proves to be a brief bounce within a larger correction, remains an open question heading into a week packed with Big Tech earnings.

What investors should watch

Whether Monday's bounce holds or chip stocks resume their slide once earnings season refocuses attention on AI capex
Microsoft, Meta, Amazon, and Apple earnings this week, which could either validate or challenge the underlying AI-spending thesis
Further developments from Chinese AI labs, given how directly competitive pricing pressure is now factoring into chip-demand assumptions
Whether the historical pattern holds: last year's roughly 19% February-to-April S&P 500 decline was fully recovered by June and ended the year up nearly 18%, a reminder that sharp corrections don't always signal a lasting trend change

Bottom line

The scale of this week's semiconductor selloff — a 10% weekly drop in the SOX, a Taiwan correction, and a 25% Kospi drawdown — reflects genuine investor anxiety layered on top of healthy profit-taking after a historic run. Whether it marks a durable shift in sentiment or another buyable dip will likely hinge on how this week's wave of Big Tech earnings addresses the underlying AI-spending debate.

This post is based on reporting from Edward Jones and CNBC as of July 24-27, 2026. This content is for informational purposes only and does not constitute investment advice.