Key Highlights

● The Philadelphia Semiconductor Index had its biggest one-day drop since June 23.

● Lam Research reported record revenue of $8.22 billion and guided December-quarter revenue to $8.6 billion.

● The SOX closed just above its 200-day moving average of about 10,677.

● Texas Instruments beat estimates and guided above consensus.

The Philadelphia Semiconductor Index suffered its biggest one-day drop since June 23 on Thursday, October 22, as a rout in artificial-intelligence and chip stocks swept Wall Street. Market data differed on the exact close, with one tally near 10,690 and another at 10,731.98.

The index, widely known as the SOX, tracks major US-listed semiconductor designers, manufacturers and equipment makers. It closed just above its 200-day moving average of about 10,677 and remains well below its June 22 record close. It is still sharply higher for the year.

Lam's warning hit equipment makers hardest

The heaviest blow came from Lam Research (NASDAQ:LRCX). After Wednesday's close, the chip-equipment maker reported record revenue of $8.22 billion and non-GAAP earnings of $2.20 a share, but guided December-quarter revenue to $8.6 billion, plus or minus $400 million, a midpoint slightly below what many investors had hoped for.

Executives warned that shortages would persist. Chief Financial Officer Doug Bettinger said revenue would have been higher without "near-term supply chain constraints that we are actively managing," adding that "things are going to continue to be constrained." CEO Tim Archer said clean-room and component constraints would "limit chip makers and equipment companies' ability to fully meet end demand" into 2027.

Lam plunged to about $230. One brokerage cut its price target to $290 from $390, and another lowered its target to $339. Peers followed: Applied Materials (NASDAQ:AMAT) tumbled to $375.58, KLA (NASDAQ:KLAC) sank and ASML (NASDAQ:ASML) fell to $1,560.54. Teradyne (NASDAQ:TER) plunged $36.74 to $308.75 ahead of its own report on October 27.

Chipmakers and AI names joined the slide

Chip designers fell too. Nvidia (NASDAQ:NVDA) slid to $212.21 after CEO Jensen Huang said that "the demand of the capital is much greater than the availability of the capital." Advanced Micro Devices (NASDAQ:AMD), Intel (NASDAQ:INTC), Marvell Technology (NASDAQ:MRVL) and SanDisk (NASDAQ:SNDK) each fell sharply, and Micron Technology (NASDAQ:MU) dropped below $900. Broadcom (NASDAQ:AVGO) and Arm Holdings (NASDAQ:ARM) also retreated.

The selloff hit smaller semiconductor stocks as well. FormFactor (NASDAQ:FORM), MACOM Technology (NASDAQ:MTSI), Semtech (NASDAQ:SMTC), Cohu (NASDAQ:COHU) and Vishay Intertechnology (NYSE:VSH) all fell sharply, in moves tied to the sector rather than to company news.

Meta Platforms (NASDAQ:META) set the backdrop. Its plan for 2026 capital spending of $135 billion to $145 billion, together with negative free cash flow, raised questions about how long the AI spending boom can be financed.

A global chip selloff

The weakness was worldwide. South Korea's Kospi, Hong Kong's Hang Seng and Japan's Nikkei all fell sharply, and China's CSI 300 entered a bear market.

At home, the damage dragged down the major indexes. The Nasdaq Composite sank 694.00 points to 26,008.86, its steepest drop since June 5, and the S&P 500 fell 93.74 points to 7,663.43. Technology was the worst sector. "Investors are starting to realize that there are some holes in the AI story," one strategist said.

Not every chip report disappointed. Texas Instruments (NASDAQ:TXN) beat estimates and guided above consensus, though it gave back its after-hours gain amid the rout. After the bell on Thursday, Western Digital (NASDAQ:WDC) beat forecasts and raised guidance, but its shares fell in after-hours trading.

Support Level and Earnings Tests for Chips

The SOX's 200-day moving average will be closely watched as a support level. Teradyne reports on October 27, and Intel reports on October 29. Microsoft (NASDAQ:MSFT), Alphabet (NASDAQ:GOOGL) and Amazon (NASDAQ:AMZN), among the biggest buyers of AI chips, report next week as well. Their spending plans will help determine whether Thursday's slide deepens or proves temporary.