Lam Research drops 5% as crowded semiconductor trade unwinds

Lam Research Corp. shares fell 5% on Tuesday as a Bank of America survey showed 80% of fund managers viewed semiconductors as the most crowded trade.

Lam Research Corp. shares fell 5.03% to $369.34 on June 16, underperforming a broader market rally that pushed the S&P 500 up 1.65% and the Nasdaq 100 up 3.06%. The decline erased about $24.6 billion in market value from the semiconductor equipment maker, which had posted a 320% gain over the previous 52 weeks. The iShares Semiconductor ETF (SOXX) also fell, though Lam Research's decline was among the steepest among equipment makers as investors took profits in the sector's biggest winner.

"When that many professional investors are simultaneously aware they are overweight the same position, the incentive to move first is powerful," the Bank of America survey's authors wrote. The survey, released Tuesday morning, showed 80% of respondents viewed semiconductors as the most crowded trade, the highest reading in the survey's history. The selloff accelerated after May import prices came in at 1.9%, nearly double the 1.1% consensus, with an annual gain of 6.7%, the largest since August 2022. The data complicated the view that the US-Iran peace deal, which sent WTI crude down more than 4% to a three-month low, had resolved inflation concerns. Some fund managers began positioning for a hawkish hold at the Federal Reserve's first meeting under new Chair Kevin Warsh later this week.

Lam Research had been the standout performer among semiconductor equipment makers in the first quarter. Columbia Threadneedle Investments, in its first-quarter 2026 investor letter, cited "insatiable demand" for the company's etching and deposition tools used in AI server production. The company reported revenue of $5.84 billion for the March quarter, up 9% sequentially and 24% from a year earlier, as the AI infrastructure super cycle drove record capital expenditure commitments from the world's leading foundries and memory manufacturers. Hedge fund ownership rose to 123 portfolios at the end of the first quarter, up from 104 in the prior period, according to Insider Monkey's database.

The selloff extended across the semiconductor equipment complex. Applied Materials (AMAT), ASML Holding, and KLA Corp. all declined in Tuesday's session, though Lam Research — with a market capitalization of $486 billion — had the most to give back after its 320% run. The broader market context added to the tension: the 10-year Treasury yield dropped to 4.42%, its lowest in a month, as investors rotated out of crowded tech positions into sectors benefiting from lower oil prices. Airlines and cruise operators rallied, with United Airlines Holdings gaining more than 3% and Royal Caribbean Cruises rising more than 6%, as the slump in crude oil lowered fuel costs.

For investors, the question is whether Tuesday's decline represents a healthy correction in an overheated trade or the beginning of a deeper rotation. Lam Research's revenue growth of 24% year over year and its position at the heart of the AI infrastructure buildout provide fundamental support. The company's tools are essential for producing the advanced memory and logic chips that power AI servers, a demand driver that Columbia Threadneedle described as an "AI infrastructure super cycle." But with 80% of fund managers already positioned in semiconductors, the marginal buyer may be exhausted in the near term. The Fed meeting later this week adds another variable: a hawkish hold on rates could accelerate the unwind of crowded tech positions, while a dovish stance could draw buyers back into the sector.

This article is for informational purposes only and does not constitute investment advice.