The PHLX Semiconductor Sector Index rose more than 5% as investors bought beaten-down chip stocks; UBS said hedge funds had cut momentum and semiconductor longs by about 5% of market capitalization.
Wall Street and chip stocks rebounded as dip buying returned to semiconductor names tied to the AI trade. The PHLX Semiconductor Sector Index closed more than 5% higher, with Intel up 8.6% ahead of Thursday earnings. UBS's trading desk said hedge funds had reduced long positions in momentum and semiconductor shares by about 5% of market capitalization, one of the largest pullbacks on record, suggesting the recent sell-off may be nearing an end. The sector had been pressured by concerns that low-cost Chinese AI models performing strongly could reduce demand for the expensive chips used to train and run advanced systems from companies such as Anthropic and OpenAI. Even after the rally, chip stocks remained down about 3% over the past five trading days.