Global chip stocks are facing another wave of selling, but fund managers are cautioning that now is not the time to buy the dip.

On July 28, Paul Markham, Global Head of Equities at GAM, stated that market capital remains heavily concentrated in AI and tech stocks. "There are really too many people on the same side of the trade right now," he said, implying that the crowded trade hasn't fully unwound and the sector's correction may not be over. He advises investors to maintain their exposure to tech stocks, but to reduce positions modestly and wait for a better entry point.

The semiconductor sector's decline deepened on Tuesday. On one hand, investors are beginning to reassess whether the AI investment frenzy can justify the sector's elevated valuations. On the other hand, growing concerns about shifts in the competitive landscape are adding to the selling pressure on chip stocks. Under the combined weight of valuation pressure and weakening sentiment, the global semiconductor sector is under downward pressure.

However, Markham believes that short-term volatility has not altered the long-term investment thesis for the AI industry. He noted that the fundamentals of some AI-related companies, such as SK Hynix, remain robust. With improving profit margins and stronger pricing power, the market still has reason to assign higher valuations to these companies.

Low Volume Amplifies Volatility, Earnings Season a Key Catalyst

Markham pointed out that the summer's low trading volume and reduced liquidity are a key backdrop for the current market turbulence. Reduced liquidity accelerates capital rotation, which in turn magnifies price swings, and these swings do not fully reflect changes in corporate fundamentals.

He expects the market may enter a period of "pause and consolidation," with the recovery of this year's upward momentum potentially coming later. This suggests that chip stocks may lack clear support in the near term, and investors will need to wait for a further repair in market sentiment and capital flows.

As chip stocks struggle, the market's focus is shifting to the upcoming tech earnings season. The capital expenditure plans of Meta and Amazon will be a key window for observing the AI investment cycle. These disclosures will not only influence the market's judgment on the sustainability of AI demand but may also reshape investor expectations for the semiconductor industry's outlook.