Record semiconductor sales and strong corporate earnings are no longer enough to satisfy investors in artificial intelligence. Wall Street's chip stocks suffered another steep selloff on Thursday, October 22, with the Philadelphia Semiconductor Index plunging 6.7% as doubts intensified over the enormous spending commitments supporting the AI industry.
The index closed at 10,731.98, according to Nasdaq's official market data. The losses were widespread. Intel dropped 7.1%, Advanced Micro Devices fell 7.6%, Nvidia declined approximately 4.4%, and semiconductor equipment supplier Lam Research sank nearly 12%.
Lam's decline was particularly revealing because its underlying business continued to expand. The company had reported record quarterly revenue of $8.22 billion, up 22% from the preceding quarter, alongside stronger operating margins and profits.
Its October 21 earnings release also projected revenue of approximately $8.6 billion for the December quarter, with a possible variation of $400 million in either direction. The outlook nevertheless failed to reassure a market accustomed to semiconductor companies repeatedly exceeding ambitious growth expectations.
Investors are increasingly scrutinising the spending behind those expectations. The construction of AI data centres requires vast quantities of advanced processors, memory chips, networking equipment and power infrastructure. Technology companies have committed billions of dollars to expanding capacity, but there are growing questions about how quickly the resulting AI services can generate enough revenue to justify that investment.
For chip manufacturers, those commitments have translated into exceptional demand. The Semiconductor Industry Association reported that worldwide semiconductor sales reached $159.7 billion in August, an increase of 144.3% from a year earlier. Sales had expanded for 18 consecutive months.
The weakness in share prices therefore reflects a reassessment of future earnings and valuations rather than evidence that semiconductor demand has already collapsed.
The pressure has also spread across Asia, where manufacturers supply much of the memory and advanced equipment used in AI systems. Earlier this month, South Korean and Japanese chip stocks suffered heavy losses as investors confronted higher financing costs and uncertainty over the returns from AI infrastructure.
Thursday's retreat followed a brief recovery in American semiconductor shares earlier in the week. The Philadelphia index had already lost 11.4% during the previous week, its largest weekly decline since March 2025, before recovering some ground on Monday.
The renewed selling weighed heavily on the broader American market. The Nasdaq Composite fell 2.6%, while the S&P 500 declined 1.2%. The Dow Jones Industrial Average finished almost unchanged, illustrating how concentrated the losses were in technology-related companies.
Semiconductor manufacturers are still reporting substantial sales growth, but investors have begun demanding more than evidence of rising chip orders. Lam's earnings showed how demanding market expectations have become: even record revenue and a forecast for further growth could not prevent a double-digit share-price decline.
