The global selloff in chip stocks is not yet a buying opportunity, according to GAM's Paul Markham. Investor positioning remains crowded, suggesting further downside risk before a sustainable recovery can take hold.

Markham, a portfolio manager at the London-based asset manager, warned that the recent decline in semiconductor shares has not flushed out enough speculative longs to create an attractive entry point. The sector's heavy weighting in major indices and popularity among momentum funds means positioning is still extended.

While valuations have compressed, the fundamental outlook for chip demand remains uncertain amid slowing global growth and inventory corrections. Markham emphasized that patience is required until positioning normalizes and clearer catalysts emerge.

The comments come as the PHLX Semiconductor Index has fallen sharply from its peak, testing key technical levels. Until crowding eases, Markham sees more favorable risk-reward elsewhere in the technology space.