Chip rally pauses as energy shock drains momentum

Semiconductor stocks have dominated retail and institutional portfolios in 2026, driven by relentless AI capex demand and bullish sentiment on AI-enabling hardware. The SOXX index sits up 72.88% year-to-date, with mega-cap chips NVDA, AMD, and Broadcom among the most-watched names. NVDA's call-to-put ratio hit extreme levels at 3.03, signaling retail call bias has become unhinged. On Wallstreetbets, seven of the top eleven trending tickers are semiconductor or storage names, with NVDA ranked #8 and AMD ranked #9 in discussion volume.

But momentumThe empirical fact that winners keep winning over the medium term. stalled hard on May 13. The inflationThe rate at which prices rise across an economy. print and Fed repricing triggered a sharp sell-off in mega-cap growth and semis. AVGO fell sharply pre-market after sentiment flipped from bullish to bearish, with analysts citing a potential reversal in AI-driven capex acceleration. One analyst noted that Western Digital, the storage play, has outperformed NVDA by 3x over the past month, suggesting the most obvious AI capex winners may have already peaked. The Bokeh Capital CIO said today's selloff reflects exhaustion in momentum, not just macro fears, retail call buying has reached unsustainable levels.

The debate now centers on capex sustainability. Mega-cap tech (MSFT, GOOGL) is still aggressively spending on AI infrastructure, and OpenAI's decision to halt revenue-sharing payments to Microsoft exceeding $38 billion signals a potential shift in cost structure and profit models. If capex growth moderates or redirects away from pure GPU buying, chip upside could compress. The semiconductor cycle is historically boom-bust; today's extreme valuations and retail enthusiasm echo 2021 peaks.

Bears argue that with valuations already stretched and macro tailwinds reversing, the easy money in semis has been made. Bond bears are reloading rate hike bets, which pressures high-multiple growth names most. However, AI infrastructure spending remains structural and long-cycle, and large-cap tech will likely maintain elevated capex even in a slower growth environment. The key watch is whether capex guidanceCompany-issued forecasts of future financial performance. in earnings sustains conviction or softens.