By Jacob Sonenshine
After rising more than 200% in the past five years -- more than double the S&P 500's gain -- a fund that tracks the top companies in the semiconductor industry is slipping.
To steer clear of what appears to be a waning chip rally, consider running to a separate area of the stock market.
Avoiding chip stocks is prudent right now, but it can be tricky. Many of the manufacturers that sell equipment and components into data centers have some correlation to the AI chip stocks. Even some utilities do, too. These data center plays often look like one big AI trade, so investors looking to avoid chips should also avoid these other areas.
That brings Trivariate Research founder Adam Parker's stock screen into focus. He lists stocks that have the lowest correlations to AI chip stocks in the last four months.
The ones that have outright negative correlations to AI chips -- those that often rise when AI chips fall -- are capital markets companies Intercontinental Exchange, CME Group, cboe Global Markets, MarketAxess Holdings, and Tradeweb Markets Inc., software providers Appian Corp. and Adobe, and online vehicle auctions company Copart.
Other stocks on the screen are not negatively correlated to AI chips, but have extremely low positive correlations, making them largely detached from the data center trade. They include household names Mastercard, and Clear Secure.
Running from chips looks like a disciplined move right now with the way the market is trending.
The VanEck Semiconductor Exchange-Traded Fund, which counts artificial intelligence chip makers Nvidia, Broadcom, Taiwan Semiconductor, Micron Technology, and Advanced Micro Devices as top 15 holdings, has soared over the past five years. Driving the outperformance has been explosively growing demand for data center chips, as Big Tech companies have ramped up their artificial intelligence capabilities.
But these semiconductor names are starting to run out of steam.
The ETF is now down almost 9% from its record high of $426. At a current $394, it has faced selling pressure every time it reaches $400 give or take since early March. At that level, much of the coming profit growth is already priced in, leaving the door open to sellers to come in and knock the shares lower.
On Monday, Nvidia's CEO Jensen Huang said at the annual GTC conference he expects over $1 trillion in cumulative data center revenue from 2025 through 2027. That's above the just-under $1 trillion analysts had forecast for that period, according to FactSet. But even that could not move Nvidia's stock up more than a few tenths of a percentage point Tuesday morning. It fell into the red by midday.
The stock is still below the $186 level it topped out at for the month of March. It remains well below its $202 record high because it's already reflected so much future growth.
Many fear it's only a matter of time before the major customers -- OpenAI, Anthropic, Meta Platforms, Alphabet, Microsoft, Oracle, and Amazon.com -- reduce their planned spending on chips. They've already built out their data centers rapidly and are now under pressure from the market to increase their returns on investment, which could conceivably involve reducing these major investments. Already, Oracle said on its earnings release last week it's not increasing its planned capital expenditures for this year.
"The core overhang for the compute names, and really Nvidia + Broadcom, has been the durability of capex...at the cloud service providers," writes Jefferies trading analyst Jeffrey Favuzza. "None of these questions were answered during the keynote [at GTC]."
For now, consider running to other areas of the market.
Write to Jacob Sonenshine at jacob.sonenshine@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
March 17, 2026 12:33 ET (16:33 GMT)
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