Nvidia (NVDA) shares declined more than 2% in early trading Wednesday, falling to $195.79, as a wave of profit-taking swept through the semiconductor sector following its historic first-half rally. The pullback came one day after the stock gained 2.6% and reclaimed the $200 level for the first time in several sessions.
The broader technology sector also felt the pressure. The Nasdaq Composite dropped 0.7%, the S&P 500 slipped 0.3%, and the Dow Jones Industrial Average lost 27 points. Nvidia remains down nearly 7% over the past month despite recovering from recent lows.
Chip Stocks Pause After Record Run
The weakness follows an extraordinary first half for semiconductor stocks. The VanEck Semiconductor ETF (SMH) surged more than 70% in the first six months of 2026, its best first-half performance since the fund's inception in 2000. Many of the sector's biggest winners experienced sharp reversals on Wednesday.
Micron Technology fell 6%, though the memory-chip maker remains up roughly 270% year to date. Sandisk dropped 8% after soaring more than 850% during the first half. Broadcom declined about 1%, while Advanced Micro Devices slipped around 4%.
The sector's gains have been fueled by expanding demand for artificial intelligence infrastructure, but investor enthusiasm has broadened beyond graphics processing units (GPUs) to other parts of the semiconductor ecosystem.
Investors Rotate Toward Other AI Beneficiaries
While Nvidia remains the dominant supplier of AI accelerators, the market narrative has shifted significantly during 2026. The first phase of the AI boom centered largely on GPUs, where Nvidia established a commanding lead. More recently, investors have focused on memory chips, central processing units (CPUs), and semiconductor manufacturing equipment.
Companies like Micron have benefited from supply constraints in memory markets, while Intel and AMD have gained from growing expectations that agentic AI systems will require significantly more CPU capacity alongside GPUs. This rotation has contributed to Nvidia's relative underperformance despite continued strength in its underlying business.
According to CNBC's Jim Cramer, Nvidia's stock may have become a source of funds for investors seeking exposure to other areas of the AI supply chain that appear earlier in their growth cycles. Nvidia shares rose roughly 1,000% between the launch of ChatGPT in late 2022 and the end of 2025, dramatically outperforming broader markets. That strong performance has left some investors looking elsewhere for the next phase of AI-related gains.
For more on how Nvidia's competitive position is evolving, see Nvidia Faces H2 2026 Test: Can Vera Rubin, Software Edge Offset Competition? and Nvidia Lags Chip Rally as Smart Money Rotates to Memory, Custom Silicon.
Burry Renews Bearish Semiconductor Bet
Adding to the debate around semiconductor valuations, investor Michael Burry disclosed a new round of bearish positions targeting the sector. In a Substack post published Tuesday, Burry said he refreshed his wager against the iShares Semiconductor ETF (SOXX) by purchasing put options expiring in March 2027. The ETF includes major chipmakers such as Nvidia, AMD, Broadcom, Intel, Micron, and Applied Materials.
Burry argued that semiconductor stocks have become significantly extended after the AI-driven rally. He pointed to the Philadelphia Semiconductor Index trading at one of its most stretched levels relative to its 200-day moving average. "The SOXX itself is a pure form of overvaluation in an index, a form that is rarely seen and never so easily recognized as such," Burry wrote.
Investor concerns around Nvidia extend beyond valuation. As AI spending continues to expand, competition across the semiconductor industry has intensified. Memory suppliers, CPU manufacturers, custom-chip developers, and equipment makers are all capturing larger portions of AI-related investment budgets. Nvidia remains best known for its graphics processors, but investors are increasingly evaluating whether future AI infrastructure spending will be distributed more broadly across the industry.
For additional context on Nvidia's recent moves, see Nvidia Slips Below $200 as AI Enthusiasm Shifts to Memory and CPU Plays.
This article is for informational purposes only and does not constitute financial advice.
