Chip stocks slide as AI spending worries deepen

A global sell-off in chip stocks intensified Tuesday, briefly pushing the Nasdaq-100 into correction territory and sending major Asian semiconductor shares sharply lower as investors questioned the pace, cost and risks of the artificial intelligence buildout.

The pressure began overnight in Asia and spread to Wall Street. Samsung Electronics and SK Hynix, the main producers of memory used in AI data centers, fell more than 15%, according to NBC News. The Guardian reported that both South Korean semiconductor companies dropped more than 10%, dragging the Kospi share index down by 11.5% to its lowest point since mid-April. Kioxia, a Japanese computer storage maker, fell 18%, NBC News reported.

In the United States, shares of chip and memory companies also tumbled. Sandisk, Western Digital, Seagate, Micron and Advanced Micro Devices fell around 10% in early trading, according to NBC News. Dell Technologies, which makes servers that use chips and memory from those companies, dropped 13%, while Intel slid 7%. The Guardian reported that Intel, AMD, Sandisk, Western Digital and Seagate were all down by more than 4% after Wall Street opened.

The Nasdaq-100, which tracks the 100 largest non-financial companies on the Nasdaq exchange, fell nearly 2% and briefly entered correction territory, defined as a decline of at least 10% from a recent record high. The Guardian reported the index was down more than 10% from its early June record.

Analysts pointed to fresh concern about China’s chipmaking ambitions after a report that the country had begun mass production of homegrown deep ultraviolet chip-making tools. NBC News said the report did not name the Chinese state-backed company and that it could not verify the report. Shares of established chip-equipment makers, including ASML, Canon and Nikon, fell sharply after the report.

“We believe the market was likely spooked by the progress of China’s chip-making equipment capabilities, and was worried that this progress would threaten the competitive position of global chip making and chip equipment leaders,” said Jing Jie Yu, an equity analyst at Morningstar. Yu called the sell-off “largely a kneejerk reaction and overdone.”

China’s push to develop its own AI supply chain was also underscored Monday when shares of Chinese memory chip maker CXMT rose 466% in its Shanghai stock market debut, The Guardian reported.

Investor concerns are not limited to competition. The Guardian reported that traders are also focused on heavy borrowing and “circular funding” in the AI industry, in which artificial intelligence companies finance one another. On Monday, The Wall Street Journal reported that Nvidia was in talks with OpenAI about providing $250 billion for a large data center project in Ohio. The Guardian reported that Nvidia shares fell 5% Monday and the cost of insuring the company’s debt against default rose.

“The market reaction to the Nvidia news was swift,” said Ipek Ozkardeskaya, a senior analyst at Swissquote. “Nvidia fell 5% and closed the session below the $200-per-share mark. More importantly, Nvidia’s five-year CDS spiked, suggesting that it may not yet be the right time to buy the dip.”

The sell-off comes ahead of earnings reports from Meta, Amazon, Microsoft and other companies spending heavily on AI data centers. Alphabet shares fell 7% last week after the company raised projected capital expenditures to as much as $205 billion, mostly for data centers. Evercore analyst Mark Mahaney wrote that the increase “increases the odds of similar behavior from AWS and Azure,” though he added that “cloud demand appears relentless.”

JPMorgan said Friday that AI-related corporate spending is set to approach “about $870bn by year-end 2026,” up 77% from a year earlier. Hyperscalers such as Amazon, Meta, Microsoft and Alphabet account for “about $750bn of that total,” said Fabio Bassi, JPMorgan’s head of cross-asset strategy.

Broader U.S. markets held up better than chip shares. The S&P 500 traded higher at midday Tuesday, while the Russell 2000 was only slightly lower. Apple rose about 1%, reaching a market value of more than $5 trillion for the first time and surpassing Nvidia as the world’s largest public company. Nvidia shares were slightly higher by midmorning Tuesday.