Chip stocks tumble 21% as the AI trade cools, but they're still up 60% this year

Semiconductor stocks have taken a beating. The Philadelphia Stock Exchange Semiconductor Index dropped 21.3% between June 23 and November 2, according to ico-optics.org, while broader global equities slipped just 1.2% over the same stretch. Rising interest rate expectations, stretched valuations and hard questions about how AI infrastructure actually gets paid for fueled the slide.

Chinese equity funds absorbed some of the worst damage — twenty of them landed among the hundred worst-performing funds worldwide in the report's tally, dragged down by local economic worries and fading regional indices. Korean funds bled too, thanks to heavy concentration in memory chipmakers Samsung Electronics and SK Hynix.

The pain spread well past chips. Blockchain-focused exchange-traded funds fell sharply, largely because former bitcoin miners now run the sprawling data centers that power AI infrastructure. Clean energy, battery and uranium funds also sank on fears that higher rates and a slowing AI buildout would cut into power demand.

Growth, momentum and domestic U.S. small-cap funds joined the losers, hit by heavy exposure to the same crowded trades. It's a whiplash moment for a sector that spent the year sprinting — and a reminder of how lopsided the AI rally had become.

Even after the sell-off, semiconductor stocks remain up more than 60% for the year, a cushion that keeps the long-term story intact despite the brutal autumn. The next act hinges on two things: where interest rates go, and whether AI infrastructure financing holds up.

For now, the correction is doing what corrections do — reminding investors that high-growth tech cuts both ways, and that diversification and risk management are the only real seatbelts.