Semiconductor ETFs came under pressure Tuesday as a sharp sell-off in South Korea's technology sector spilled over into U.S. chip stocks, raising concerns about the durability of the artificial intelligence-driven rally ahead of a closely watched earnings report from Micron Technology (MU).

The weakness was broad-based across the semiconductor ecosystem. Micron, Western Digital Corp (WDC), SanDisk Corp (SNDK), Marvell Technology Inc (MRVL), Qualcomm Inc (QCOM), Applied Materials Inc (AMAT), Lam Research Corp (LRCX), Teradyne Inc (TER) and Seagate Technology Holdings (STX) all traded sharply lower Tuesday morning after South Korea's tech-heavy KOSPI index plunged nearly 10%, led by double-digit declines in memory-chip giants Samsung Electronics and SK Hynix.

The pullback comes at a critical moment for semiconductor ETFs, many of which have delivered outsized gains this year thanks to strong demand for AI infrastructure and memory products. Investors are now assessing whether the latest decline represents a temporary pause in the rally or the beginning of a broader reset for AI-linked chip stocks.

Micron Earnings Emerge As The Next Catalyst

Market participants appear increasingly cautious ahead of Micron's earnings report due after Wednesday's close. The company has become one of the most closely watched names in the AI supply chain because of its exposure to high-bandwidth memory (HBM), a critical component powering advanced AI systems.

A recent third-party report raised concerns about memory pricing trends, adding to investor nervousness ahead of the results. The fears weighed heavily on memory-related stocks globally, with SK Hynix and Samsung leading losses in Asia before the weakness spread to U.S. markets.

Wedbush analyst Daniel Ives characterized the sell-off as a "breather" rather than a fundamental shift in the AI investment theme. He said the AI revolution remains in its early stages and investors should expect periodic "gut check" moments following the sector's massive gains.

Others pointed to multiple factors behind the decline, including profit-taking after chip stocks more than doubled in less than six months, concerns surrounding China-based open-source AI models, and continued volatility linked to the recent SpaceX IPO.

Which Semiconductor ETFs Are Most Exposed?

The sell-off is likely to be closely watched by investors in major semiconductor funds, including the VanEck Semiconductor ETF (SMH) and the iShares Semiconductor ETF (SOXX), both of which hold significant allocations to leading AI and memory-chip companies. Both funds declined around 8% on Tuesday.

Other funds exposed to the sector include the SPDR S&P Semiconductor ETF (XSD) and the First Trust Nasdaq Semiconductor ETF (FTXL), both of which declined between 6% and 8%.

For ETF investors, Micron's outlook may prove more important than its quarterly results. A reaffirmation of strong AI-driven memory demand could reinforce the bull case for semiconductor ETFs, while signs of slowing pricing momentum may trigger further volatility across a sector that has been one of Wall Street's strongest performers in 2026.