Is the AI stock selloff not a crash signal? Wall Street veteran strategist Yardeni: Valuation pullback combined with upward earnings revisions means semiconductor stocks present a buying opportunity.

Yardeni Research President and Wall Street veteran strategist Ed Yardeni said on Monday that the recent selloff in artificial intelligence (AI)-related stocks does not signal a broad market crash, but rather helps cool down what had been an overheated AI investment boom. He believes AI technology has genuine commercial value and is expected to generate substantial profits in the future, and that the recent pullback may offer investors an opportunity to position in semiconductor stocks. In an interview, Yardeni said the recent tech stock correction is "letting some air out of the AI bubble," which is a positive signal for healthy market development. Although it remains difficult to determine which tech companies will ultimately benefit most from AI development, he believes AI technology itself will continue to advance and gradually achieve commercial profitability. Yardeni noted that with the recent decline in stock prices, valuations of AI-related stocks have come down, but Wall Street analysts continue to raise earnings estimates for the companies involved, meaning the investment appeal of some stocks is strengthening. He is particularly bullish on the rebound prospects of the semiconductor sector. Data shows that semiconductor stocks currently trade at a forward P/E ratio of about 13.5 times, below the S&P 500's 18.5 times. Meanwhile, continued growth in cloud computing revenue, the large backlog of orders accumulated by enterprises, and demand for AI infrastructure buildout all provide support for the semiconductor industry's future growth. According to a Yardeni Research report, analysts expect the semiconductor industry's earnings to grow 114.3% in 2026 and a further 77.9% in 2027, indicating that the market remains optimistic about the industry's earnings growth over the next two years. In addition, the combined remaining performance obligations of Microsoft Corporation (MSFT.US), Oracle Corporation (ORCL.US), Amazon.com, Inc. (AMZN.US) and Alphabet Inc. Class C parent Alphabet (GOOGL.US) amount to US$2.5 trillion. This metric mainly reflects the scale of business for which companies have signed contracts but have not yet recognized revenue, meaning large tech companies still have substantial contracted revenue awaiting recognition in the future. However, Yardeni Research also noted that how to raise sufficient funding for AI infrastructure buildout and complete related projects on schedule will be the main challenge for tech companies in converting these contracts into actual revenue. In the memory chip sector, the firm believes that driven by strong AI demand, major memory chip makers' capacity orders are already booked through 2029, giving the companies involved greater pricing power. Yardeni's remarks came as the U.S. semiconductor sector had just experienced a sharp selloff. Last Friday, Intel Corporation (INTC.US) shares plunged 28.6%, SanDisk (SNDK.US) fell 13.5%, and Advanced Micro Devices (AMD.US) dropped 10.9%. However, Yardeni believes this correction does not mean investors are broadly retreating from U.S. stocks, but rather that market capital is beginning to rotate from AI-related stocks that had previously posted large gains into other sectors such as healthcare, financials and industrials. As for the overall U.S. stock market trend, Yardeni still expects a year-end rally but reminds investors to watch for short-term volatility that could arise from the U.S. midterm elections and GEO Group Inc political developments. He said the U.S. midterm elections on Tuesday and the potential re-escalation of a war involving Iran could both become sources of market uncertainty. Yardeni Research has advised investors since September 15 to remain cautious and consider holding some cash in order to look for buying opportunities after the elections or if GEO Group Inc political risks intensify further. Yardeni also warned that if U.S. political divisions widen further after the midterm elections, future negotiations over government debt and federal government shutdowns could become more difficult, bringing new risks to financial markets in 2027. Nevertheless, he remains bullish on U.S. stocks' year-end performance and expects a traditional "Santa Claus rally" from Thanksgiving through the end of December. In the markets, U.S. stock index futures rebounded in early trading on Monday after a week in which tech stocks led losses. S&P 500 futures rose 0.5%, Nasdaq 100 futures gained 0.8%, and Dow futures rose 271 points, or about 0.52%. Investors are closely watching upcoming corporate earnings, employment data and the results of the U.S. midterm elections. However, retail investor sentiment remains relatively cautious. Data from the investing community Stocktwits shows that investors' view on the ETF tracking the S&P 500 has shifted from "bullish" the previous day to "neutral," while they remain bearish on the ETFs tracking the Nasdaq 100 and the Dow Jones Industrial Average. Overall, Yardeni believes the recent tech stock correction is more a correction of excessive valuations and overly concentrated positioning rather than a reversal of the long-term growth logic of the AI industry. With valuations coming down and earnings expectations continuing to improve, AI-related sectors such as semiconductors are still expected to regain investor favor.