Philadelphia Semiconductor Index falls into a bear market as AI capex doubts grow

The Philadelphia Semiconductor Index fell about 10% in the week ending July 17, 2026, its steepest weekly drop in more than a year. That leaves the index of major U.S. chipmakers down roughly 20% from its late-June record, meeting the technical definition of a bear market.

The reversal is a sharp shift in sentiment toward the AI trade that has powered chip valuations for two years. On Friday alone the index slipped 1.6%, with Nvidia down 2.2%, Applied Materials off 5.6%, SanDisk down 4%, Intel lower by 2% and Micron down 0.5%.

The pullback followed two developments that reignited doubts about the returns on AI capital spending. Moonshot AI unveiled Kimi K3, which the Chinese startup calls the world’s largest open-weight AI system, sharpening fears that cheaper, freely downloadable models could undercut demand for the most expensive Western chips and systems. Separately, a report that Google’s Gemini 3.5 Pro launch is running months behind schedule fed concern that the pace of frontier progress — and the spending it justifies — may be slowing.

A 20% drop from a peak clears the conventional bar for a bear market, but it follows an extraordinary run: the same stocks set records in late June. One volatile week does not settle whether AI infrastructure spending is overbuilt, and none of the chipmakers has yet reported the demand slowdown investors are pricing in.

Second-quarter earnings from the largest chipmakers will test whether the sell-off reflects a real turn in AI demand or a repricing of expectations that had run ahead of results.