Have chip stocks fallen enough to present an "opportunity"? Institutions pour cold water: AI trades remain crowded, it's not yet the time to bottom-fish.

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Global chip stocks are once again facing sell-offs, but fund managers warn that it is still too early to bottom-fish.

On July 28, Paul Markham, Global Head of Equities at GAM, said that current market funds remain highly concentrated in AI and tech stocks. "There really are too many people on the same side right now," implying that crowded trades have yet to fully unwind, and sector corrections may not be over. He advises investors to maintain tech stock exposure but moderately reduce positions and wait for better opportunities to add on.

The semiconductor sector's decline widened further on Tuesday. On one hand, investors are reassessing whether the AI investment boom can support the sector's lofty valuations; on the other, concerns about changes in industry competition are rising, further intensifying sell-off pressure in chip stocks. Under combined valuation pressure and weakening sentiment, the global semiconductor sector is under strain and trending downward.

However, Markham believes that short-term fluctuations do not alter the long-term investment logic of the AI industry. He states that the fundamentals of some AI-related companies such as SK Hynix remain solid, and as profit margins continue to improve and product pricing power strengthens, the market still has reason to assign these companies higher valuations.

Low trading volumes magnify market volatility; earnings season becomes a key catalyst

Markham points out that thin summer trading and shrinking volumes are an important background to the current intensified market volatility. The decline in liquidity makes capital rotation faster, which further amplifies price swings and does not fully reflect the real changes in company fundamentals.

He expects the market may enter a period of "pause and adjustment," and the recovery of upward momentum seen this year may have to wait until later on. This means that chip stocks may lack clear short-term support, and investors need to wait for further improvement in market sentiment and liquidity.

As chip stocks face pressure, the market is turning its attention to the upcoming tech sector earnings season. Capital expenditure plans from Meta and Amazon will become important windows for observing the AI investment cycle. The related disclosures will not only affect the market's judgment of the sustainability of AI demand, but may also reshape investors' expectations for the semiconductor industry's outlook.

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