MW If the semiconductor rally loses steam, it's retail investors who could get hurt the most

By Gordon Gottsegen

Retail investors gobbled up semiconductor stocks in May

Semiconductor stocks have been on a tear, but some investors wonder how long the rally can last.

Given the strong momentum of the stock-market rally over the past two months, it may be hard to remember the lukewarm performance of tech stocks during the first few months of the year.

Investors spent the early weeks of 2026 rotating out of popular tech stocks, and then the onset of the Iran war created a macroeconomic shock that pushed the Nasdaq composite COMP into a correction.

This had a chilling effect on tech-loving individual investors. Retail investor stock-buying activity in 2026 was much lower than in recent years. There were even days where retail investors were net sellers of stocks, selling more individual stocks than they were buying, which is something that hadn't happened since 2023.

But now, it seems like retail investors are back, and it was the rally in semiconductor stocks that convinced them to return.

Read: Iran war volatility is pushing retail investors to sell stocks, but they aren't leaving the market entirely

Retail investor buying volume in May was higher than any other month in 2026, according to data collected by brokerage eToro. The data also shows that most of this buying was concentrated in semiconductor stocks, including Nvidia (NVDA), Micron $(MU)$, Sandisk $(SNDK)$, Intel $(INTC)$ and AMD $(AMD)$. They also bought index-tracking exchange-traded funds like the State Street SPDR S&P 500 ETF Trust SPY and Invesco QQQ Trust Series I QQQ, as well as the iShares Semiconductor ETF SOXX.

This may not be surprising given the impressive scale of the semiconductor rally. The PHLX Semiconductor Index SOX gained roughly 69.1% in April and May, with individual names like Micron and Sandisk gaining 187.4% and 166.8%, respectively, over those two months.

"This boom has created a heyday for retail investors. At eToro US, retail investors had more buy volume in May than in any other month so far this year, led by stocks like Nvidia, Micron, Sandisk, Intel and AMD," eToro investment analyst Bret Kenwell said. "In other words, retail investors have been right in the thick of things when it comes to last month's, and this year's, biggest winners."

This means retail investors have benefited from the semiconductor rally - however, they could see outsize losses if the trend reverses. Investors were getting a taste of this on Friday, as the SOX headed for its biggest daily drop of the year - on track to cement its biggest two-day decline since the April 2025 tariff tantrum.

Pros on Wall Street have turned skeptical about the semis rally, wondering how far it can go. Some have drawn comparisons to the tech rally of the dot-com bubble.

"SOX up 71% in 9 weeks only surpassed on March 10th, 2000 which was the peak of the dot-com bubble. We would caution chasing further strength high-beta momentum into June," BTIG chief market technician Jonathan Krinsky wrote in a note last week.

Sentiment toward semiconductors started to turn when shares of Broadcom $(AVGO)$ plummeted after the company's earnings report earlier this week. Broadcom's earnings per share beat analyst consensus, but the company's forward guidance fell short of expectations. This caused the stock to drop 15.8% shortly after market open on Thursday. Still, it finished the day slightly higher, tallying a loss of 12.6%, as retail investors bought the dip.

The stock was down another 6% on Friday. Retail investors will continue to feel it if semiconductors continue to lose steam here, especially if investors buy more on the way down.

-Gordon Gottsegen

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June 05, 2026 12:35 ET (16:35 GMT)

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