Semiconductor stocks tumble as yields rise; NVDA, AMD, MU sell off on inflation fears

The semiconductor rally that had defined much of May came to a sudden halt on Friday as rising Treasury yields and inflationThe rate at which prices rise across an economy. concerns triggered aggressive rotation out of growth stocks. NVDA, AMD and Broadcom (AVGO) all declined sharply, with MU (Micron) particularly hard hit, down 5% as investors fled high-multiple names in a broad equity selloff. The tape told a clear story: growth was out, value and industrials were in, with the Russell 2000 outperforming the Nasdaq by more than 200 basis points.

The catalyst was twofold. First, Treasury yields surged across the curve as inflationThe rate at which prices rise across an economy. expectations rose on oil price spikes and geopolitical risk, creating a headwind for valuation-sensitive tech names. Second, a brief cross-currents report surfaced that China was signaling a preference to source chips domestically rather than relying on U.S. semiconductor imports, adding uncertainty to Nvidia's addressable market. The combination spooked traders who had been piling into semiconductor names on the back of AI capex momentumThe empirical fact that winners keep winning over the medium term. and the NVIDIA earnings run-up into May 22.

Chip stocks had been the obvious beneficiary of the AI narrative: demand for GPUs, AI accelerators and memory for training and inference workloads had driven record capex cycles from cloud giants like Amazon and Microsoft. However, the sharp repricing in yields and inflationThe rate at which prices rise across an economy. expectations has created a near-term headwind. Analytics from Goldman Sachs showed that at 5% yields, technology sector valuations compress materially, and semiconductor-heavy indices like the Philadelphia Semiconductor Index (SOX) become particularly vulnerable.

The bull case for semis remains intact on a 12-month horizon: AI capex is not going away, and geopolitical tensions could keep fab capacity tight. However, the near-term momentumThe empirical fact that winners keep winning over the medium term. has clearly broken, and traders are reassessing entry points. Some analysts flagged that semiconductor earnings (AMD, AVGO, MU reporting this week and next) will be critical in determining whether the selloff is a healthy consolidation or the start of a sharper repricing.