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AI Stocks Face a 2028 Test After Chip Sell-Off

BY | ETF Database
4:37 am ET 11/12/26 | 7 VIEWS
Stocks tied to the AI buildout took the hardest hit after the U.S. midterm elections. The PHLX Semiconductor Sector Index fell 12.2% on November 5, according to a November 6 report from T. Rowe Price. The S&P 500 dropped 4.4% that day, while the Nasdaq Composite Index lost 5.5%.Key Takeaways: Chip stocks fell harder than the broader market after the midterms, extending a slide that began in late September. Political pushback, slower permitting, and new supply could make 2028 an inflection point for AI infrastructure spending. TTEQ’s largest positions are Nvidia and AMD, with Amazon, Meta and SpaceX also among its holdings. That selloff wasn’t a one-day shock, global equity portfolio specialist Jennifer Martin wrote in the report. Chip stocks had already dropped 18% from September 30 to the pre-election close, so the vote hit a sector that was already repricing. Earnings estimates kept rising through the slide, according to Martin. Forward price-to-earnings multiples for semiconductors, or what investors pay relative to expected earnings over the next 12 months, compressed from about 32 to 17. Attention is shifting from the size of AI spending toward financing needs and returns on investment. Demand for AI infrastructure remains strong, in Martin’s view. Much of what’s planned for 2026 and 2027 is already permitted or under construction. The bigger question is timing. Political pushback and slower permitting could start to affect deployment in the second half of 2028, the report said. See more: Midterm Vote Sparks Tech Sell-Off as Jobs Data Stays Strong New manufacturing capacity is also expected in 2028, Martin wrote. As supply constraints ease, ordering could slow and spark an inventory correction, even if AI adoption keeps growing. Funding is changing too. Big tech companies largely paid for the first phase of AI infrastructure with their own cash, according to Martin. The industry is now leaning more on borrowing and stock sales, and higher financing costs could delay projects even when demand is healthy. “Companies capable of funding growth internally may be better positioned as capital becomes more expensive,” Martin wrote.How an Active Tech ETF Approaches the AI CycleMartin’s case for selectivity ties into the approach behind the actively managed T. Rowe Price Technology ETF TTEQ). made up 9.71% of the fund as of November 11, followed by Advanced Micro Devices, Inc. (AMD) at 8.03%, according to the firm. Taiwan Semiconductor Manufacturing Co. (TSM), Broadcom Inc. (AVGO) and Intel Corp. (INTC) also rank in the top 10. TTEQ returned 12.5% year-to-date as of November 11, according to ETF Database. Its benchmark, the MSCI All Country World Index Net, returned 10.5% over the same stretch. Both figures include the post-election selloff. Shares closed at $36.59 on November 10, compared with a 52-week high of $46.05, according to the firm’s website. Launched October 23, 2024, the fund holds $443.8 million in net assets and charges a competitive 0.63% expense ratio. Beyond traditional tech, Amazon.com, Inc. (AMZN) and Meta Platforms, Inc. (META) rank among the fund’s top five holdings, according to T. Rowe Price. Rocket and satellite maker Space Exploration Technologies Corp. (SPCX) accounts for another 3.35%. For more news, information, and analysis, visit our Active ETF Content Hub.

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