Chip stocks tumble as AI sell-off deepens

Chip stocks tumbled Tuesday as the broader AI trade deepened its retreat, with the Nasdaq 100 briefly entering correction territory. The sell-off comes just ahead of a heavy slate of Big Tech earnings, where investors will be watching capital expenditure guidance from the largest cloud and AI infrastructure spenders — the same names that have driven demand for NVDA, AMD and AVGO chips over the past two years.

The timing matters. NVDA has posted $215.9B in revenue, up 65.5% year-over-year, with 71.1% gross margins and $4.90 in diluted EPS — numbers that reflect a business still growing at scale despite its size. AMD's revenue of $34.6B (+34.3% YoY) and AVGO's $63.9B (+23.9% YoY) show the AI buildout has broadened beyond a single vendor, with AVGO's 67.8% gross margin and 36.2% net margin underscoring the profitability of custom silicon and networking exposure tied to hyperscaler capex.

The second-order question is whether this is a valuation reset triggered by rate or macro jitters, or the start of a genuine re-rating of AI capex assumptions. If upcoming hyperscaler earnings confirm capex guidance is intact or rising, the sell-off in chip names could prove a buyable dip against still-strong fundamentals. If instead earnings reveal capex moderation or commentary on AI ROI scrutiny, the correction could extend meaningfully given how much of these stocks' valuations are built on continued spending growth.

What to watch: guidance language on AI infrastructure spend from the major cloud earnings reports this week, and whether NVDA, AMD, and AVGO stabilize or continue lower as that data lands.