Semiconductor stocks began to recover on Monday after a brutal Friday selloff erased roughly $1.3 trillion in market value from the sector. The decline, triggered by Broadcom's disappointing outlook and a stronger-than-expected U.S. jobs report, raised fears that the Federal Reserve might keep interest rates elevated longer than anticipated. The tech-heavy Nasdaq fell 4.2% on Friday, while the Philadelphia Semiconductor Index plunged 10%—its worst session since March 2020.
By Monday, however, major chip names rebounded. Micron Technology rose about 8% in premarket trading after a 14% drop on Friday. Nvidia gained nearly 3%, and Advanced Micro Devices advanced around 4%. Nasdaq futures climbed more than 1.5%, suggesting investors viewed the selloff as a temporary reset rather than a fundamental shift in the AI spending outlook.
Huang Calls Selloff a 'Discount'
Speaking in Seoul, South Korea, Nvidia CEO Jensen Huang sought to reassure investors. “We're at the beginning of it, and whatever happened to the stock market, you should be very happy because now you can buy at a discount,” Huang said, referring to the long-term artificial intelligence opportunity. His comments helped fuel Monday's recovery, as many market participants interpreted the rout as a buying opportunity tied to sustained AI growth.
Analysts remain broadly constructive on AI demand. UBS Global Wealth Management's chief investment officer Mark Haefele wrote that “despite renewed anxiety over rates, equity issuance, and geopolitics, we expect the rally to resume.” He noted that strong corporate fundamentals, particularly in technology, continue to support equity markets, and that spending on AI infrastructure and applications is expected to remain elevated as businesses increasingly adopt the technology.
Historical Data Points to Resilience
Some analysts point to market history as a reason for optimism. Chris Beauchamp, chief market analyst at IG.com, noted that the S&P 500 recently surged more than 19% over two months off its late-March lows. According to Carson Investment Research data going back to 1950, that has only happened seven times before, and on every occasion the index was higher one, three, six, and twelve months later. The average return one year after such signals exceeded 40%, with a 100% historical success rate.
Beauchamp also highlighted the supportive earnings backdrop. S&P 500 earnings per share are projected to grow roughly 23% in 2026, a pace achieved only a handful of times in recent decades. Historically, years with earnings growth above 20% have generally coincided with strong equity-market performance.
Cautionary Tale: The 2018 Playbook
Despite the optimistic outlook, Beauchamp cautioned that risks remain. The primary concern is that markets could face a scenario similar to 2018, when the Federal Reserve continued raising interest rates despite strong economic growth, ultimately contributing to a market downturn. “The sole exception was 2018, when the Fed was hiking aggressively into late-cycle strength. The 2018 analogy is clearly the risk scenario traders are now stress-testing,” he said.
He added that while historical evidence favors the view that the latest decline represents a temporary pause within a broader bull market, investors should not dismiss the possibility of a more prolonged correction. “Whether this week's volatility is the beginning of something more damaging, or simply the healthy pause that strong rallies require, is genuinely uncertain. The weight of historical evidence points firmly toward the latter. But the 2018 playbook is close enough to current conditions that it cannot be dismissed, and traders should be sizing their positions accordingly rather than assuming history will rhyme neatly,” he concluded.
For context, Nvidia shares have been a key driver of the AI rally. In a related development, Nvidia Shares Surpass $200 as Analysts Cite AI Leadership and Valuation Support. Meanwhile, broader market dynamics are also drawing attention: 5 Stocks Drawing Heightened Institutional Interest Ahead of Key Earnings Week.
This article is for informational purposes only and does not constitute financial advice.
