This week’s drop in semiconductor stocks has tracked a broad Wall Street decline as investors await the Fed’s December meeting minutes due later on Wednesday for hints on its interest rate path

U.S. chip stocks added to a string of losses on Wednesday, with Wall Street’s main semiconductor benchmark dropping from record highs following its strongest year since 2009, when the sector rebounded after the financial crisis.

Drops of more than 2% in Advanced Micro Devices, Qualcomm and Broadcom weighed most on the PHLX semiconductor index, which was 2.1% lower.

The chip index has now dropped nearly 7% since hitting a record high close on December 27.

This week’s drop in semiconductor stocks has tracked a broad Wall Street decline as investors await the Fed’s December meeting minutes due later on Wednesday for hints on its interest rate path.

Fuelled by optimism about AI and more recently by expectations the Fed will cut interest rates this year, the PHLX soared 65% in 2023, its strongest performance since 2009. That compares to annual gains of 43% and 24%, respectively, for the Nasdaq and S&P 500.

Chip stocks have also benefited from bets that a downturn in global demand in 2023 that saw memory chip makers reduce production has largely bottomed out.

Nvidia, viewed as the top provider of AI-related chips, saw its stock market value more than triple last year to $1.2 trillion, making it Wall Street’s fifth most valuable company. It dropped nearly 1% on Wednesday.

In a client note, BofA Global Research analyst Vivek Arya recommended exposure to cloud computing and cars through stocks including Nvidia, Marvell Technology, NXP Semiconductors and ON Semiconductor. He also recommended stocks including KLA Corp and Arm Holdings, for exposure to the increasing complexity of chip designs.