Semiconductor stocks tumble into bear market as AI spending scepticism deepens
Investors grow wary of returns on massive AI infrastructure outlays, while Chinese competition and financing concerns weigh on memory chip makers and equipment suppliers.
Semiconductor stocks extended their losses on Tuesday, with the PHLX Semiconductor Index falling more than 2% in the previous session. The sell-off has pushed the sector into bear-market territory, with chip stocks now down more than 20% from their June record highs. The decline was broad-based, affecting major US-listed memory and storage leaders as well as equipment manufacturers.
US-listed shares of Micron Technology, SK Hynix, and Sandisk all fell more than 5%, while Broadcom, Intel, Marvell, and Qualcomm slid more than 2%. Semiconductor equipment makers ASML, Applied Materials, and Lam Research also dropped. Nvidia fell 0.5% in premarket trading, adding to a 5% loss on Monday, while AMD was set to open 4% lower.
The downturn followed sharp declines in South Korea, where SK Hynix fell more than 14% and Samsung Electronics dropped more than 13%. European semiconductor stocks also moved lower. The global pullback was driven by concerns over circular financing, intensifying competition from China, and growing investor scepticism regarding the returns on massive AI infrastructure spending.
On Monday, Nvidia lost its position as the world's most valuable company to Apple after reports emerged that it was in talks to backstop $250 billion in funding for OpenAI, tied to a major data center project. This followed a $500 billion strategic collaboration between Nvidia and SK Group, announced on Friday. Meanwhile, Chinese memory maker CXMT's IPO in Shanghai this week renewed concerns that its rapid expansion could weigh on memory chip prices.
A report from The Information stated that a Chinese state-backed company began mass-producing a key piece of chipmaking equipment, which fueled a sell-off in ASML shares. Investors are now awaiting earnings reports this week from Microsoft, Amazon, and Meta, all of which are expected to announce further increases in AI-related spending. Any hint of a slowdown would spell trouble for semiconductor companies. Concerns that the Federal Reserve could resume raising interest rates have also weighed on market sentiment.
