Chip and memory stocks saw heavy selling during Tuesday’s opening trading session. Shares of several major companies dropped between 4% and 15% in early trade. The companies that fell included Micron Technology (MU), SK Hynix (SKHY), Advanced Micro Devices (AMD), Intel (INTC), Seagate Technology (STX), Western Digital (WDC), SanDisk (SNDK) and other companies in the sector.
The Roundhill Memory ETF (DRAM) was down nearly 12% at the time of writing, according to StockTwits. The iShares Semiconductor ETF (SOXX) also declined around 7%.
Why chip and memory stocks are falling
Morgan Stanley’s Chief US Equity Strategist and Chief Investment Officer Mike Wilson explained why investors are now selling chip and memory stocks during an interview with CNBC. Wilson said investors had earlier punished hyperscaler companies because their free cash flow was weak, even though earnings were strong.
Wilson said, “Hyperscalers, the reason why those stocks have underperformed is because, while the earnings have been good, the free cash flow generation is atrocious, and so, the market has punished them.” Wilson said investors are now shifting their focus away from hyperscalers and are targeting semiconductor and storage companies.
Wilson said, “I think a lot of that is behind us and now they’re going after semiconductor and some of the storage names.” Wilson believes the sell-off in semiconductor and storage stocks has already become deep. Wilson said the correction in semiconductor and storage stocks is “pretty well advanced” and severe, according to a CNBC interview.
Wilson’s view on the stock market
Wilson said the S&P 500 is currently moving in a choppy manner. He said uncertainty over the Federal Reserve’s next moves is one reason for the market’s volatility. He also pointed to continued uncertainty surrounding the war as another reason for the market swings.
Wilson said, “I still think we’re chopping around… my guess is because of the Fed uncertainty, because of the war uncertainty still.” Wilson expects this choppy market trend to continue for about another month, according to Wilson’s CNBC interview.
What Wilson says about the economy
Wilson noted that the S&P 500 is still up about 8% year-to-date, despite sharp declines in many of the market’s leading stocks. He said this shows that the broader US economy still has a strong foundation.
Wilson said, “It’s pretty amazing given the corrections we’ve had in the leaders. That is a good sign that there is a pretty good underlying backdrop in the economy in my view”, during a CNBC interview.
Wilson’s S&P 500 target
Wilson remains optimistic about the outlook for the S&P 500 through 2026. He said he believes the benchmark index could reach 8,000 by the end of 2026. Based on current levels of around 7,400, Wilson’s target suggests an upside of more than 8%, according to StockTwits. The S&P 500’s 52-week high is 7,621, which was reached on June 2, 2026.
What investors are watching now
Wilson said investors are now paying close attention to three key factors when choosing stocks. The first factor is earnings quality. The second factor is earnings stability. The third factor is free cash flow generation. Wilson said, “The top 100 stocks, on a quality basis, are now starting to outperform, which is right on schedule with the recovery”, according to a CNBC interview.
ETF performance
The SPDR S&P 500 ETF Trust (SPY) has gained 16% over the past 12 months. The Invesco QQQ Trust (QQQ) has risen 19% over the same period. The iShares US Technology ETF (IYW) has climbed 26% during the past 12 months. StockTwits noted that the article is for informational purposes only and is not investment advice.
