SMH ETF Falls 7.2% in 6 Days: Is the Chip Selloff Over?

Let's do the weekly debrief, because this was one of those weeks where the headline index numbers (S&P 500 down a whopping 0.22% on the week, everyone panic) told you almost nothing about what actually happened underneath the surface.

The real story was semiconductors. $SMH just posted a 7.22% decline over six trading days, its longest losing streak since May of last year, according to commentary flagged on Mad Money. The proximate villain: $HXSL (SK Hynix), which dragged Asian chipmakers into the gutter after Broadcom CEO Hock Tan, in what may be the worst investor relations moment of Q4, compared the AI trade to a casino. Ray Dalio piled on, calling AI a classic bubble nearing a bursting point. Samsung and SK Hynix each fell roughly 9% in a single session. South Korea's KOSPI dropped as much as 7%. The Philadelphia Semiconductor Index lost 2.7%. It was not a fun week to be long chips in Asia.

Here's the thing though: the carnage was weirdly contained. As The Traveling Trader pointed out, roughly 40% of S&P 500 stocks are technically in a bear market right now, yet $QQQ is only down about 2% and $SPY is hanging near all-time highs. Tech mega-caps and the Magnificent Seven actually hit fresh all-time highs last month, even as the broader semiconductor complex cracked. Truist's Keith Lerner called it correctly on Bloomberg: the AI bull market just turned four years old, and historically five out of six bull markets that reach a four-year anniversary see gains in year five. Earnings growth for Q3 2026 is estimated at 29.6%, which would be the third consecutive quarter above 25%. The fundamentals haven't broken, even if the sentiment has.

Meanwhile, the one semi name getting loudly defended is $MU. Cramer pointed to Micron's 26 long-term take-or-pay contracts covering revenue through 2030, arguing the Chinese memory competition fears are overblown. ASML, for its part, reported Q3 net sales of 11.7 billion euros in line with estimates, with EUV lithography up over 45% year-over-year, though the company flagged it cannot fully meet demand for two more years due to supply chain constraints. Solid quarter, no new catalysts, and the stock paid for it.

The broader market backdrop isn't helping. The 10-year Treasury is sitting at 5.24%, the dollar is near 18-month highs, WTI is approaching $95 and Brent has topped $106, and the Fed's path remains higher-for-longer with no relief in sight from oil or economic data. Tim Waterer of KCM Trade flagged 5.5% on the 10-year as the threshold where bonds start genuinely competing with equities for capital flows. We're not there yet, but we're not far either.

The setup heading into next week is a classic tug-of-war: earnings growth that would make any analyst blush on the upside, offset by a rate environment that keeps multiple expansion on a short leash. If you were hoping the chip selloff would shake out the weak hands and reset the sector for a bounce, well, the next few earnings prints will tell you whether Hock Tan was being recklessly honest or just dramatically wrong.