AI Chip Stocks Fall for a Second Day as Intel Drops Over 7%

A widespread sell-off hit the artificial intelligence hardware sector for a second straight day Wednesday, with industry giants seeing significant drops. The downturn suggests investors are taking profits after a months-long rally, even as the successful public debut of a new chip competitor and high-stakes trade talks in China highlight the sector's dynamic future.

"I think it'll be interesting to see if the market really gives it this valuation, and not only that, but whether it holds up after the fact,” Rainmaker Securities managing director Greg Martin told Yahoo Finance, commenting on the market debut of AI chipmaker Cerebras.

The sell-off contrasted sharply with the blockbuster initial public offering of Cerebras Systems (CBRS), an Nvidia rival that saw its stock soar as much as 99% on its first day of trading Thursday. The stock, originally priced at $185, opened for trading at $350 per share, underscoring the intense investor demand for new AI hardware plays.

The synchronized downturn in established chip stocks, despite the fervor for new entrants, raises questions about whether the AI-driven market rally is overheating. The volatility comes as technology executives, including Nvidia CEO Jensen Huang, are in China for a summit with President Xi Jinping, where the potential for billions in chip sales hangs in the balance.

Profit-Taking Hits Sector After Record Run

The pain for semiconductor stocks was broad. On Wednesday, Intel (INTC) led the decline, falling 7.19 percent. Other major players also stumbled, with ASML (ASML) dropping 5.64 percent, Micron Technology (MU) down 5.42 percent, and Advanced Micro Devices (AMD) losing 5.14 percent. Market leader Nvidia (NVDA), which has seen its market cap swell to $5.48 trillion, saw its shares fall 4.1 percent.

This continues a trend from Tuesday, when the PHLX Semiconductor index (^SOX) fell roughly 5 percent in its worst day in seven months as investors began to cash in on the sector's massive 2026 gains. The index remains up 60 percent since the beginning of the year.

Cerebras IPO Soars Against the Tide

The main counter-narrative to the sell-off was the stunning debut of Cerebras. The company’s unique approach to chip design, which uses a single, dinner-plate-sized silicon wafer for its processor—the Wafer-Scale Engine (WSE)—sets it apart from the "pizza slice" method used by Nvidia and AMD. This design, Cerebras claims, delivers faster AI processing while using less power.

The company's IPO, which could value it at over $48 billion, is seen as a bellwether for a new wave of AI startups. Cerebras has a significant deal to provide OpenAI with 750 megawatts of computing power, for which it is granting OpenAI warrants that could amount to a 10 percent stake in the company, according to the Financial Times.

China Remains a $50 Billion Wild Card

Adding another layer of complexity is the potential for renewed sales to China. Nvidia CEO Jensen Huang is part of a delegation of US executives in China, where reports have surfaced that the US may allow the sale of Nvidia’s H200 chips to about 10 Chinese firms, including Alibaba and Tencent. Huang has estimated the Chinese AI market could be worth $50 billion this year, but no deals have been finalized as US export controls have severely limited access.

For investors, the sell-off appears to be a bout of healthy profit-taking rather than a fundamental shift in the AI thesis. The wild success of the Cerebras IPO demonstrates that capital is still flooding into the sector, seeking new ways to power the AI revolution. The key challenge is navigating the short-term volatility and high valuations of market leaders like Nvidia while assessing the long-term potential of high-risk, high-reward challengers and the unpredictable geopolitical landscape.

This article is for informational purposes only and does not constitute investment advice.