The semiconductor sector just had its worst day since March 2020. The PHLX Semiconductor Index, better known as SOX, cratered 10.3% on June 5, wiping out more than $1 trillion in market value across chip stocks in a single trading session. Micron Technology shares dropped roughly 13-14%, while Marvell Technology fell as much as 17%.

What triggered the selloff

The catalyst was Broadcom. The chipmaker issued a revenue outlook that fell short of expectations, specifically citing weaker-than-anticipated demand for AI chips.

A robust US jobs report landed around the same period, raising fresh concerns that the Federal Reserve might keep interest rates elevated for longer than investors had been pricing in. For high-growth tech stocks trading at sky-high valuations, higher rates mean future earnings are worth less in today’s dollars, and semiconductor stocks had been priced for a future where AI revenue would grow almost without limit. The result was a rotation trade, with investors dumping high-momentum semiconductor names and moving into sectors less sensitive to interest rate expectations.

Micron’s decline was particularly striking given context. The company had only recently crossed the $1 trillion market capitalization threshold. Marvell, which has positioned itself aggressively in the custom AI chip and data center networking space, saw its shares punished just as severely. Nvidia, AMD, Intel, and Broadcom itself all posted significant declines, confirming this wasn’t a company-specific issue but a sector-wide repricing.

The ‘Parabolic 7’ correction

This selloff followed several months of explosive gains in semiconductor stocks, particularly those tied to AI infrastructure buildouts. Analysts have been using the term “Parabolic 7” to describe the handful of chip stocks that had gone nearly vertical in price appreciation. The semiconductor sector remains well above where it traded a year ago, but the gap between stock prices and near-term revenue reality had grown wide enough that even a modest disappointment could trigger a massive unwind.

The $1 trillion evaporation in a single session is roughly equivalent to the entire GDP of the Netherlands, gone in about six and a half hours of trading.

What this means for investors

Investors who bought Micron near its trillion-dollar peak are sitting on double-digit losses in a matter of days. Earnings guidance from Nvidia, which remains the bellwether for AI chip demand, will be the next major data point investors watch.