AI chip stock selloff deepens as profit-taking and rate hike fears hit semiconductor sector

AI chip stocks continued sliding on Friday with TSMC down over 3% despite beating earnings, as its higher-than-forecast capex plans spooked investors. The SMH semiconductor ETF has dropped 9.5% over the past month, with Nvidia falling 2.2%, Applied Materials tumbling 5.5%, and AMD down over 1%.

Why it matters: Analysts attribute the selloff to profit-taking after a prolonged run-up and growing jitters about AI investment costs, compounded by a 52% market-implied probability of a September interest rate hike.