AI Spending Panic + China’s Chip Breakthrough Spark $500 Billion Selloff
A brutal selloff in semiconductor stocks deepened Tuesday as investors panicked over ballooning artificial intelligence costs and China’s surprise progress in making its own chip machines, wiping out hundreds of billions in market value.
The Nasdaq 100 Index is now teetering on the edge of a correction, dragged down by a sharp rout in chip shares that began last week [205779]. The selloff hit Asian markets hardest, with South Korean stocks leading the decline as investors questioned the high costs of the AI boom [205695]. SK Hynix shares crashed nearly 15%, pulling down Micron and Nvidia in premarket trading Tuesday [205605].
The trigger for the latest wave of selling was a double shock. First, investors are increasingly questioning whether massive investments in AI infrastructure will ever deliver expected returns [205790]. Second, reports emerged that Chinese companies have begun manufacturing immersion deep-ultraviolet (DUV) lithography machines — essential tools for advanced chip production — threatening the dominance of Dutch giant ASML [205730]. ASML shares plunged more than 5% on Tuesday [205730]. The news also rattled Asian markets after reports that China can now produce DUV machines, signaling a potential shift in global chip supply chains [205630].
The rout has erased billions from major chipmakers, with the selloff spreading across emerging markets and pushing a key stock benchmark to its lowest level in over three months [205774]. Analysts say the combination of debt-fueled AI spending and rising competition from China is creating a volatile environment for the sector [205790].