Semiconductor valuations correct sharply as market panic peaks
U.S. markets lost $2.8 trillion in value following the midterm elections, with the SOX semiconductor index valuation dropping to its lowest level since late 2022. Analysts expect significant profit growth for chip firms next year despite the recent sell-off.
U.S. markets experienced extreme volatility after the midterm elections, with $2.8 trillion in market value lost on Thursday. Leverage ETFs collected over $15 billion in October, with a triple-leveraged chip ETF losing over one-third in value. Goldman Sachs’ panic index rose to 9.57, a historic high, though historical data suggests the S&P 500 is 4.6% higher three months later in such cases.
The SOX semiconductor index valuation dropped from 33 times expected earnings in June to 14 times, the lowest since late 2022. Despite this correction, analysts expect 51% higher profits for chip firms next year. Kathy Wood noted that AI is capital-heavy, making bond traders influential in tech valuations. Morgan Stanley predicts a further low after a brief recovery. Corporate buybacks are running at $5 billion per day. The probability of a December rate hike is priced at 77%.
While valuations have corrected significantly, the market remains fragile due to leverage and macroeconomic uncertainties. The next key catalysts are expected to be inflation data and the Anthropic IPO. The sharp decline in semiconductor valuations reflects broader concerns about the sustainability of the AI infrastructure boom and potential macroeconomic headwinds.