Chip Stocks Tumble on AI Spending Doubts and China Rivalry

Investors dumped semiconductor shares across Asia and the United States on Monday and Tuesday as doubts grew over whether the billions poured into artificial intelligence infrastructure will generate returns soon enough to justify the outlays. South Korea’s Kospi index fell 10.8 percent to its lowest close since mid-April after a temporary circuit-breaker halt, with SK Hynix dropping 14.65 percent and Samsung Electronics declining more than 13 percent. In New York, Nvidia shares slid 5 percent on Monday, ending its brief reign as the world’s most valuable listed company, while premarket trading on Tuesday showed further weakness in Nvidia, Micron, AMD and Intel.

The immediate triggers were a Wall Street Journal report that Nvidia was discussing a $250 billion financing package for an OpenAI data-center project in Ohio and the Shanghai debut of Chinese memory-chip maker CXMT, whose shares jumped nearly 470 percent. Analysts cited by Reuters and The Guardian noted that the CXMT listing and separate reports of Chinese firms producing immersion deep-ultraviolet lithography equipment—technology long dominated by ASML—raised fears that cheaper domestic alternatives could erode the pricing power of established leaders. ASML shares fell more than 8 percent in Europe on Monday.

A longer-running talent competition between Samsung and SK Hynix added to the unease. SK Hynix, which leads the high-bandwidth memory market used in AI accelerators, agreed last year to pay employees 10 percent of operating profits, translating to roughly $476,000 per worker this year, mostly in cash. Samsung’s memory-division staff are set to receive about $400,000 while foundry workers receive roughly $135,000, prompting dozens of engineers to apply at the rival and leading Samsung to obtain a court injunction barring two former employees from joining SK Hynix for 18 months. Both firms plan multi-trillion-dollar investments through 2040, yet South Korea’s semiconductor industry still faces a projected shortfall of 54,000 workers by 2031.

Oil prices slipped below $90 a barrel amid a pause in Iran-related tensions, and the Federal Reserve’s two-day policy meeting began Tuesday against this backdrop of volatile energy costs and technology valuations. Jane Sydenham of Rathbones told the BBC that heavy retail leverage in Korea amplified the moves, while Standard Chartered’s Sundeep Gantori noted that broker forecasts of a memory-price peak in 2027 had also weighed on sentiment. European indexes, less exposed to AI names, opened modestly higher.

The sell-off follows a period in which the Kospi had more than doubled from the start of the year to mid-June before giving back about a third of those gains. Credit-default swaps on Nvidia widened, signaling rising caution about the circular financing arrangements that link chip makers, cloud providers and AI developers. No single earnings report has yet clarified whether the current pace of data-center spending will produce commensurate revenue growth.