Semiconductor stocks plunge as profit-taking surges amid inflation worries

[The Financial News]  
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Semiconductor shares on the New York Stock Exchange tumbled on the 12th (local time).
\r\nThe semiconductor rally, fueled by optimism over artificial intelligence (AI), was jolted by a cold splash of inflation.
The sell-off followed a Labor Department report that U.S. consumer prices in April rose 3.8% from a year earlier, the sharpest increase in about three years since May 2023.
As investors confirmed that disruptions to energy and raw material supplies caused by the war in Iran were pushing inflation higher, they moved to lock in gains.
Qualcomm closed down $27.22, or 11.46%, at $210.31, while Intel fell $8.83, or 6.82%, to finish at $120.61.
Micron, a leading memory chip maker, ended the session down $28.75, or 3.61%, at $766.58.
Intel and Micron both saw losses of more than 11% early in the session, but bargain hunting helped trim those declines.
SanDisk also narrowed its losses from the 10% range and closed down $95.54, or 6.17%, at $1,452.02.
NVIDIA, the sector leader, reversed early weakness and climbed $1.34, or 0.61%, to $220.78, extending its record-high closing price for a second straight day.
AMD fell $10.50, or 2.29%, to $448.29, while Broadcom dropped $9.13, or 2.13%, to $419.30.
The iShares Semiconductor ETF (SOXX) also pared losses late in the session and finished down $16.77, or 3.15%, at $515.99.
So far this year, as the AI trend has shifted from training to inference, the center of gravity in semiconductors has moved from GPUs to CPUs and memory chips, with Intel and Micron leading the rally.
But after the recent sharp gains, investors apparently seized on the CPI release as an opportunity to unload shares and take profits.
According to CNBC, Intel's stock has soared 430% over the past year and 218% so far this year. That has left the shares looking severely overvalued.
Based on expected earnings per share for the next 12 months, Intel's forward price-earnings ratio is above 114 times. By comparison, the S&P 500 Index's forward PER is around 21 times.
However, hedge fund manager Dan Niles remains optimistic, saying Intel has room to surge just as NVIDIA did in the early years of the AI boom, and that the current rally is only the beginning.
Meanwhile, Micron's stock has jumped 702% over the past year and 160% this year, yet its forward PER stands at just 7.97 times, well below the market average.
That suggests memory demand is so strong that future profit growth is expected to outpace the rise in share prices by a wide margin.
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dympna@fnnews.com Song Kyung-jae Reporter