Investors seem to be second-guessing the stunning rally in chip stocks as another earnings season picks up steam.

Semiconductor stocks, following their stratospheric rise this spring, were on the verge of a bear market on Thursday.

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The benchmark PHLX Semiconductor Sector Index SOX of the 30 biggest U.S.-listed chip stocks was down 19% on Thursday from its June 22 record high, according to Dow Jones Market Data.

Its 4.3% retreat on Thursday to 11,8767.50 left it on the doorstep of the 11,707.78 closing level that would confirm a bear market, defined as a pullback of at least 20% from a previous peak.

Chip stocks gained in the spring as investors cooled on the "Magnificent Seven" tech companies MAGS footing the bill for the AI data-center buildout. Money instead flocked to chipmakers and other industries set to benefit from the firehose of spending.

Yet recent signs point to another shift taking place under the hood of the stock market. The S&P 500's financials sector XX:SP500.40 logged a back-to-back record close on Thursday following strong bank earnings. The Dow Jones Transportation Average DJT was up more than 30% on the year, near record territory, while the State Street SPDR S&P Retail ETF XRT ended near its highest since early 2022, according to FactSet.

"I think the broadening is very healthy," said David Royal, chief financial and investment officer at Thrivent. It also points to promising signs in recent labor-market data and retail sales. "You don't make an auto purchase unless you have some degree of confidence" in the jobs market, he added.

See: Retail sales get a boost from car buyers and Amazon Prime Day. The economy hasn't lost its mojo.

That contrasts with the SOX index, where all 30 constituents were lower from the benchmark's June record high. The worst performer since the peak has been Marvell Technology MRVL, as the below chart from Dow Jones Market Data shows.

Marvell is down almost 40% from the SOX's peak, but the stock is still up 121% in 2026, according to FactSet.

The pullback could reflect investors taking some profit — or that they might be moving on altogether.

"One of the things we are learning is that memory is short when it comes to dramatic selloffs," said Kevin Gordon, head of macro research and strategy at the Schwab Center for Financial Research. "I don't think it's a terrible red flag."