Chip Stocks Hit Cheapest Valuation in Nearly Seven Years

The PHLX Semiconductor Index now trades at a forward price-to-earnings ratio of 13 — its cheapest valuation since Jan. 23, 2019 — despite profit estimates for its components climbing 155% this year. That tension between collapsing multiples and soaring earnings is the core question investors faced after Thursday's brutal selloff.

The SOX fell 12.2% on Thursday, its worst single day since March 16, 2020, with all 30 components losing ground. The index has dropped 38.5% from its 52-week high of 14,655.29, set on June 22, 2026.

Why is the P/E falling if prices aren't?

Here's the counterintuitive part: this isn't a valuation collapse driven by price. Even after the selloff, the SOX is still up 27.2% in 2026. The forward P/E — the index price divided by the weighted rolling 12-month consensus EPS estimate from FactSet — has compressed because the earnings denominator exploded, fueled by the AI infrastructure build-out.

The multiple is now less than half the index's 26.1 valuation at the end of last year. Yet Wall Street analysts project the SOX to deliver an aggregated sales CAGR of 40.2% from 2026 through 2028, per FactSet data. That's more than four times the projected 8.7% sales CAGR for the S&P 500, which traded at a considerably higher forward P/E of 17.8 as of Thursday's close.

The last time valuations were this low, buyers won big.

When did chips last trade this cheap?

Giuseppe Sette, co-founder of Reflexivity, told MarketWatch the current SOX valuation is comparable to "almost the exact bottom" of October 2022. That low, 13.3, came on Oct. 14, 2022 — the day the SOX's 10-month bear market ended at a closing price of 2,162.32, after a 46.5% decline.

"The SOX roughly tripled off that area over the following two years" as AI spending exploded, Sette wrote. "Buying the group at that multiple was one of the best semiconductor entries of the decade."

His framing cuts to the chase: "Do you believe the EPS estimates?" For long-term investors who do, Thursday's action may offer a rare entry point. "The valuation isn't the question anymore — the durability of the 155% EPS ramp is," Sette concluded.

What are the bulls' receipts?

Hendi Susanto, portfolio manager of the Gabelli Global Technology Leaders ETF, said "the outlook for semiconductors and semiconductor equipment remains solid through the remainder of 2026 and into 2027," and put "a high probability that 2028 will be another strong year."

His read rests on hyperscaler executives' comments that "energy is not the number one supply constraint" — the shortage of high-end GPUs and chips is. Both are "bottlenecks the hyperscalers have to overcome," Susanto said, noting that "power takes longer, with a longer lead time, than chips."

He pointed to SK Hynix, which said its 2027 memory production is already sold out. "They are working on 2028 supply agreements with major customers. That is somewhat unprecedented — customers making commitments one year ahead," Susanto said.

He summarized Thursday's action as bears "pointing to possibilities, what-if scenarios" and risks out to 2028, while buyers focused on "strong demand over supply constraints and the sustainability of the economic value of AI."

How far have the biggest names fallen?

The damage on Thursday, per FactSet:

• Nvidia fell 9.3%, down 25.4% from its 52-week high; forward P/E of 12.7 vs. 25.3 at the end of 2025.
• Taiwan Semiconductor dropped 10.8%, off 27.6% from its high; forward P/E of 15.9 vs. 24.4.
• Broadcom lost 10.4%, down 41.1%; forward P/E of 14.9 vs. 32.0.
• Micron plunged 17.5%, off 47.7% — yet still up 130% in 2026; forward P/E of 3.6 vs. 8.3.
• AMD fell 17.3%, down 38.6%; forward P/E of 25.1 vs. 32.7.
• Intel dropped 10.3%, down 63.3% from its high; forward P/E of 29.7 vs. 61.9.
• Lam Research slid 16.4%, off 57.8%; forward P/E of 17.6 vs. 32.5.

The semiconductor industry's cyclical history explains some of those single-digit multiples — markets habitually discount peak earnings. But sold-out 2027 production at SK Hynix and hyperscalers' still-unmet chip demand suggest this cycle may not follow the old script. The bet now is whether the 155% earnings ramp survives contact with 2028.