Chip stock pullback sparks worries about AI rally strength, leveraged trades

The Philadelphia SE Semiconductor Index sank about 10% for the week—its largest weekly fall in over a year—and dropped more than 20% from its late-June all-time high, officially entering a bear market. The selloff was triggered by a combination of profit-taking, TSMC's failure to impress investors with earnings, China's Moonshot unveiling the world's largest open-weight AI model, and a Bloomberg report that Google's Gemini 3.5 Pro is months behind schedule.

Why it matters: The S&P 500 Momentum Index pulled back 11% in July after outperforming the benchmark by more than two-to-one this year, while global markets also weakened with South Korea's KOSPI entering a bear market and Japan's Nikkei falling into correction territory.