Europe’s AI and Semiconductor ETFs Fall Sharply as a Global Chip Rout Deepens

Chip stocks were not the only thing rattling markets this week. U.S. strikes on Iran resumed on 13 July and continued nightly through the period, reaching a ninth consecutive night by 19 July, alongside a reimposed U.S. naval blockade on Iranian ports; Brent crude jumped to its highest settlement level since mid-June on the news. Two U.S. service members were killed in an Iranian missile and drone attack in Jordan on 17 July, prompting further U.S. strikes in response, and Iran has since widened its own retaliation toward Kuwait and Jordan, with an adviser to Tehran’s supreme leader warning of a full-scale offensive should the campaign continue. That backdrop of renewed, live conflict, not merely the risk of one, adds a second source of volatility to a week in which the chip trade was already reassessing itself on its own terms.

Global chip stocks endured their worst week in over a year between 13 and 19 July, and European-listed semiconductor and artificial intelligence ETFs fell hard as a result, with weekly losses ranging from roughly 6.2% to 9.6% across the theme, even as the year-to-date picture for most funds remains strongly positive. The sell-off has raised a pointed question for investors holding AI exposure through European ETFs: is this a healthy reset after an extraordinary run, or the start of a broader repricing of how much AI infrastructure spending is actually worth.

A Global Chip Rout, With One Notable Exception

The Philadelphia Stock Exchange Semiconductor Index fell around 10% over the week, its steepest weekly decline in more than a year, and finished more than 20% below its late-June record, a decline that meets the technical threshold for a bear market. The index remains up over 60% year-to-date, underlining how sharp the reversal has been from an extraordinary run. Europe’s own technology sector was among the week’s weakest performers globally, a sharp reversal after its biggest quarterly gain since 2001 in the second quarter.

The proximate triggers were twofold. A Chinese AI start-up unveiled what it described as the largest open-weight model yet, reviving scrutiny of how quickly, and to whom, returns on Western hyperscaler AI spending will actually flow. Separately, reports that Alphabet’s flagship Gemini 3.5 Pro model is running months behind schedule added to unease about execution risk at exactly the moment capital budgets are ballooning: Alphabet’s own capital expenditure is projected to more than double this year to $187 billion. Alphabet shares fell 6.5% over two sessions on the news, leaving the stock down 14% from its May peak even though it remains up 11% year-to-date. Microsoft, meanwhile, is on course for its worst month since 2000 and is down 19% for the year. Momentum-style strategies, which had outperformed the broader market by more than two to one earlier in the year, gave back 11% in July alone against a broader market that was roughly flat.

Analysts framed the sell-off less as a fundamental repricing and more as leverage coming out of the system: retail margin balances, assets in levered exchange-traded funds and short-dated options volumes had all built up sharply during the run, and hedge funds catering to that flow have reportedly trimmed exposure to top AI infrastructure names in recent weeks. Options positioning late in the week, however, leaned toward rotation rather than wholesale de-risking, with some of the hardest-hit chip names drawing renewed buying interest.

Amsterdam-listed ASML was the sector’s clearest outlier. Shares in the Dutch lithography equipment maker have risen 60% so far this year, pushing its market capitalisation close to $700 billion after a stronger-than-expected second quarter and reviving talk that it could become Europe’s first trillion-dollar company; several major banks, including Barclays, Susquehanna and Bernstein, have set 12-month price targets above $2,600 per share, implying roughly 49% further upside. Analysts pointed to ASML’s position as the sole supplier of extreme ultraviolet lithography tools and an ongoing shift among memory chipmakers toward pricier EUV equipment as key supports, while flagging a proposed U.S. law, the MATCH Act, that could curtail its China sales, as a risk to watch.

A Rally Still Intact, A Debate Just Getting Started

Even after the pullback, the scale of the year’s AI-driven rally is difficult to overstate. Chip-related names account for seven of the ten largest point contributors to the S&P 500’s advance this year, and combined hyperscaler capital spending across Alphabet, Microsoft, Amazon and Meta is forecast at up to $725 billion for the current year, with consensus estimates pointing toward close to $900 billion in 2027. That scale of spending is precisely why earnings season, now underway, matters so much: markets are demanding evidence of revenue and margin traction, not just infrastructure build-out, before they will re-rate the sector higher. Valuations have already adjusted to reflect the more sceptical mood, with mega-cap technology multiples down from their earlier peaks even as structurally-positioned names such as ASML continue to command a premium.

Earnings Week: The Reckoning Ahead for the AI Trade

That earnings evidence starts arriving immediately, which is what makes the coming days a genuine inflection point for the funds covered below. Tesla and Alphabet report on Wednesday, with Intel and IBM also due through the week; Microsoft, Meta, Apple and Amazon follow next week, and Nvidia reports next month. Interactive Brokers and Charles Schwab report on Tuesday, offering a read on how the volatility has affected trading volumes and wealth management flows. Away from earnings, Thursday’s initial jobless claims and Friday’s preliminary July PMI and new home sales data will be watched for signs of whether the broader economy can absorb the technology sector’s turbulence. The resumed Gulf conflict remains the wildcard hanging over all of it: a further spike in energy prices would narrow the policy room available to Federal Reserve Chair Kevin Warsh just as growth concerns are building. With that backdrop in mind, the fund-level detail below shows how European-listed semiconductor and AI portfolios absorbed the week.

Europe’s AI and Semiconductor ETFs

Semiconductor funds took the heaviest weekly hit of the three groups, in line with the SOX’s double-digit decline, but semiconductor flows were the only group to turn negative on a year-to-date basis, a sign that a portion of this year’s inflows had already reversed before this week’s rout. Information Technology, the broadest of the three groups, still absorbed over a billion dollars of net new money over the week despite the price decline, buy-the-dip behaviour that shows up clearly at the fund level below.

Fund by Fund: Who Fell Furthest, Who Bought the Dip

Semiconductor exposure bore the brunt of the week. The VanEck Semiconductor UCITS ETF - USD (SMGB) fell 9.429% but remains up 73.826% year-to-date, and still pulled in over $53 million of net new assets over the week, the largest single inflow among the funds covered here. The iShares MSCI Global Semiconductors UCITS ETF - Acc - USD (SEMI) posted the steepest weekly decline of the group at 10.481%, though its 79.875% year-to-date gain remains the largest in the table, and it too drew a sizeable $265 million of weekly inflows, evidence that dip-buying, not de-risking, characterised the week’s flow picture for the largest semiconductor vehicles.

Currency and share-class distinctions matter for direct comparisons here. The Amundi MSCI Semiconductors UCITS ETF Acc - EUR (CHIP) fell a comparatively milder 8.238% for the week; as a euro-denominated share class tracking the same broad semiconductor exposure as its dollar-denominated peers, part of that gap reflects currency translation rather than underlying index divergence, so like-for-like comparison with the dollar share classes above should account for the euro/dollar move over the period. The HSBC NASDAQ Global Semiconductor UCITS ETF - USD (HNSC) fell 7.078% weekly, a smaller decline than most of its semiconductor peers, and is up 82.675% year-to-date, the highest year-to-date return in the entire table, though it recorded no net flow at all over the week.

On the artificial intelligence side, the L&G Artificial Intelligence UCITS ETF - Acc - USD (AIAG) fell 6.698% and was the only fund among those covered to see net outflows over the week, losing just under $7 million even as its year-to-date return remains a healthy 35.028%, a reminder that not every AI-themed vehicle saw buy-the-dip demand. The WisdomTree Artificial Intelligence UCITS ETF - Acc - USD (INTL) fell 9.138%, among the sharpest declines outside the pure semiconductor names, but still attracted over $14 million of net inflows. The smallest fund in the table, the Global X Artificial Intelligence UCITS ETF - USD (AIQE), fell 7.057% weekly and is up a comparatively modest 19.161% year-to-date, the lowest year-to-date figure among the funds covered, alongside continued modest inflows of just over $700,000.

Please note this article is for information purposes only and does not in any way constitute investment advice. It is essential that you seek advice from a registered financial professional prior to making any investment decision.