Signs are emerging that certain traders are wagering the recent downturn in chipmakers will be brief, even as the sector experienced its most severe single-day drop in over a fortnight.
The Philadelphia Semiconductor Index, which tracks industry leaders such as Nvidia Corp., Intel Corp., and Advanced Micro Devices Inc, recovered from a session low where it had plunged as much as 6.3%, ultimately closing down approximately 2%. This decline was sparked by a disappointing artificial intelligence chip sales forecast from Broadcom Inc., which sent its shares tumbling nearly 13% in its largest drop since early 2025.
For investors concerned they had missed the substantial rally that saw the SOX index nearly double since late March, this pullback presented a chance to purchase shares at a lower price, according to Christopher Jacobson, co-head of derivatives strategy at Susquehanna International Group.
He noted that clients acted quickly, selling put options on underperforming semiconductor stocks ranging from Broadcom to Micron Technology Inc.—a move that essentially bets on a future price recovery.
"It was evident that some market participants were positioned on the sidelines, anticipating a retreat to execute dip-buying strategies," Jacobson remarked.
Thursday's selloff temporarily interrupted the steep rally that had fueled concerns about an AI-driven market bubble. However, such anxieties have surfaced intermittently; following several prior pullbacks over the last two months, the chip index has consistently resumed its upward trajectory as investors continued pursuing gains.
"Market sentiment deteriorated somewhat this morning following Broadcom's disappointing AI chip outlook, though it's possible those concerns eased once traders recognized this might be more of an isolated company issue rather than a widespread problem affecting the sector," stated Colton Loder, managing principal at the alternative investment firm Cohalo.
Jacobson from Susquehanna added that experienced investors are increasingly adopting a strategy of gaining long exposure through individual stocks while using exchange-traded funds to hedge their positions, indicating some wariness about a potential market reversal. Despite Thursday's trading activity, he did not interpret it as a sign that enthusiasm for AI-related investments is waning.
"Investors have realized substantial profits in semiconductor shares recently," he explained, "so they are now shifting toward ETF products for hedging purposes."
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