Major semiconductor exchange-traded funds and chip stocks extended a multi-day losing streak through Wednesday and Thursday, October 15, 2026, even as Taiwan Semiconductor Manufacturing Co. (TSMC) posted a sixth consecutive quarter of record net profit. According to Seeking Alpha, the VanEck Semiconductor ETF (SMH) dropped for six consecutive days—losing over 8% during that span—putting the fund on track for its longest losing streak since May 2025.

The pullback across US and international markets highlights a sharp disconnect between current hardware manufacturing output and forward-looking investor sentiment. While foundry orders for artificial intelligence accelerators remain near capacity, equity markets are repricing semiconductor assets due to hotter-than-expected US inflation data, rising debt costs for data center operators, and questions surrounding the revenue growth of leading AI software labs.

Broad Pressure Across Semiconductor Funds and Equities

The downturn has affected multiple benchmarks and leading silicon designers simultaneously. While Seeking Alpha pointed to the six-day slide in the SMH fund, separate market tracking by Yahoo Finance noted that the iShares Semiconductor ETF (SOXX) had also declined for six straight sessions by Wednesday, October 14, alongside a seven-day drop in a closely watched semiconductor index by Thursday. In one Thursday session snapshot reported by Yahoo Finance, SOXX fell roughly 3% compared to an approximate 1% decline in the broader Nasdaq-100 proxy QQQ.

In European trading, the VanEck Semiconductor UCITS ETF slipped 4.9% over a seven-day window to trade at €99.56 on Monday, down from €100.70 the prior Friday, according to Ad-Hoc-News. Despite sitting roughly 10% below its 52-week high, the European fund remained 87% higher since the start of the year. Media reports cited by Ad-Hoc-News also indicated that semiconductor ETFs recorded net outflows of $686.7 million on Wednesday.

Individual chip equities experienced widespread selling throughout the week. According to Yahoo Finance, Nvidia and AMD fell nearly 2% and 4%, respectively, during Thursday trading, while memory manufacturers Micron and SanDisk dropped roughly 4% and 6%. Earlier in the week, memory makers Marvell Technology and SK Hynix also lost ground amid concerns over Chinese competition, and neocloud infrastructure provider CoreWeave saw its shares fall more than 16% on Wednesday after data regarding its bond yields circulated, Yahoo Finance reported.

TSMC Posts Record Quarter Amid Margin Dilution

The sector-wide equity retreat occurred alongside strong quarterly financials from TSMC, the world’s largest contract chipmaker and primary foundry for Nvidia and Apple. On Thursday, TSMC reported third-quarter 2026 net profit of NT$763.1 billion—a 68.7% year-over-year surge—on revenue of approximately NT$1.49 trillion (roughly US$46.4 billion to US$46.7 billion), according to CNBC. Free cash flow rose to NT$476.56 billion, up from NT$139.38 billion a year earlier.

Advanced manufacturing nodes, defined by the foundry as 7-nanometer and smaller architectures, generated 79% of total wafer revenue during the third quarter. The 3-nanometer process accounted for 33% of total wafer revenue, while high-performance computing represented 68% of revenue by platform, CNBC noted. Looking ahead, TSMC guided fourth-quarter revenue to between US$52.3 billion and US$54.3 billion, representing a 14% sequential increase and a 58% year-over-year jump at the midpoint. CEO C.C. Wei projected full-year 2026 revenue growth of around 44% in US-dollar terms, according to Yahoo Finance.

However, TSMC’s balance sheet and earnings commentary also included details that tempered market reaction. While third-quarter operating margin reached 58.7% (exceeding its 58% guidance ceiling), gross margin slipped to 66.4% from 67.7% in the second quarter, according to Yahoo Finance. TSMC attributed the contraction to dilution from ramping up its next-generation 2-nanometer production line, and issued fourth-quarter gross margin guidance of 65% to 67%, Investing.com reported.

In addition, CNN reported that TSMC cautioned during its earnings call that rising component prices and broader macroeconomic uncertainty were challenging demand across several non-AI market segments. Despite beating profit estimates, TSMC shares traded lower on Thursday; CNN reported a drop of about 2%, while Yahoo Finance cited a decline of roughly 3% depending on the trading window.

Inflation vs. AI Infrastructure Financing: What Is Driving the Selloff?

Financial analysts and market coverage offered differing assessments of the primary catalyst behind the semiconductor pullback. According to Morningstar and Yahoo Finance, the immediate trigger was Wednesday’s hotter-than-expected September US inflation reading, which pushed long-dated bond yields higher and raised concerns about Federal Reserve interest rate policy. Because hyperscale data center construction is heavily capital-intensive, a higher cost of capital directly threatens the borrowing power of cloud providers purchasing AI chips.

Conversely, other reports placed greater emphasis on the internal economics of the artificial intelligence sector itself. CNN highlighted growing investor skepticism over debt-heavy AI infrastructure spending and questions regarding revenue momentum at leading AI software labs, including OpenAI and Anthropic. According to Ad-Hoc-News, a recent report indicating OpenAI’s annualized September revenue came in just under $50 billion—short of the nearly $70 billion previously signaled, largely due to cloud partner accounting methods—sparked profit-taking across hardware suppliers even though actual chip orders remained unchanged.

Physical supply chain bottlenecks also remain a factor. Dutch semiconductor equipment manufacturer ASML warned on Wednesday that it may not be able to fully meet customer demand in 2027 and 2028, according to Yahoo Finance. Meanwhile, Sravan Kundojjala, an analyst at SemiAnalysis, told CNBC that TSMC is actively verifying whether its customers possess both the financing and the supporting components required to deploy the AI systems they order, noting that demand still exceeds TSMC’s supply capacity even after those checks.

Frequently Asked Questions

Was the semiconductor ETF losing streak driven by interest rates or doubts about AI returns?

Market reporting points to a combination of both factors. Hotter-than-expected September US inflation data drove bond yields higher, increasing borrowing costs for capital-intensive data center buildouts. At the same time, high debt loads at cloud infrastructure providers like CoreWeave and accounting adjustments affecting reported annualized revenue at AI labs like OpenAI prompted investors to take profits and question the timeline for returns on hardware spending.

How are TSMC’s profit margins reacting to the rollout of 2-nanometer chip production?

While TSMC’s third-quarter operating margin exceeded guidance at 58.7%, its gross margin declined from 67.7% in the second quarter to 66.4% in the third quarter. The company noted that initial capital and operational costs associated with ramping up 2-nanometer manufacturing diluted gross margins, and it projected fourth-quarter gross margins to remain in the 65% to 67% range even as total revenue climbs.

Do TSMC’s record earnings reflect broad demand across the entire electronics industry?

No. TSMC’s growth is heavily concentrated in advanced silicon for artificial intelligence and data centers, with high-performance computing accounting for 68% of third-quarter revenue and 7-nanometer or smaller nodes making up 79% of wafer sales. On its earnings call, TSMC warned that rising component costs and macroeconomic pressures are weighing on demand in other traditional electronics segments.

Sources

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