Business

The Global AI Trade Is Cracking, and Tech Stocks Are Taking the Hit

Market Volatility
By Rhea Lobo
Global semiconductor market selloff

The market’s AI obsession is facing its biggest test in months. A brutal two-day selloff in AI and semiconductor stocks has rippled from Seoul to Silicon Valley, rattling investors who’ve been riding one of the most concentrated rallies in recent memory. Investors are now questioning whether the AI-fueled rally has simply run too far, too fast.

Chips down, everywhere: The spark came from South Korea, where a local media report suggested SK Hynix was slowing its AI memory chip expansion and pivoting toward cheaper commodity DRAM — standard memory chips used in everyday computing, as opposed to the pricier AI-grade variety. That single headline detonated one of the sharpest single-day drops in recent memory across global markets:

  • South Korea’s main stock index, the Kospi, plunged 10.5%, triggering a circuit breaker as Samsung and SK Hynix each sank more than 12%.
  • Chinese stocks in Hong Kong entered a bear market, with Tencent and Alibaba leading declines as weak consumer spending weighed on sentiment.

Wall Street Catches the Fever

The selling wave didn’t stop in Asia. US tech stocks extended the rout on Tuesday, sending the Philadelphia Semiconductor Index down more than 7% and pushing Micron down as much as 13% ahead of earnings. The Nasdaq 100 fell 2.5% as Nvidia, Intel, and AMD all moved sharply lower, while the S&P 500 and Dow also slipped despite strength in defensive sectors.

  • Goldman Sachs said robust profit growth has kept 1990s-style imbalances at bay, though markets remain highly sensitive to any cracks in the “optimistic AI macro story.”
  • BTIG’s Jonathan Krinsky remains cautious, noting that semiconductors could face another 10%–15% downside.

Bulls aren’t folding yet: Wedbush’s Dan Ives called the selloff a “gut check moment” and said the AI revolution remains in the “3rd inning.” Natixis Advisors’ Jack Janasiewicz argued the move was largely technical rather than a sign of deteriorating fundamentals. Still, Krinsky warned, “Whether or not we rally in the short-term, we continue to see medium-term downside risk for the tech/AI trade.”

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