Wall Street experienced a significant "chip-wreck" selloff on Tuesday, driving fears that the artificial intelligence (AI) frenzy powering the recent equity bull market might be overblown. This rout severely impacted global stocks, with the Nasdaq 100 plummeting by 3.3%. A key gauge of chipmakers, which had previously doubled from war-driven lows, slid approximately 8%.
The losses were even more pronounced in Asia, where South Korea’s Kospi index plunged 10% from its record high. This dramatic fall saw over $900 billion in equity value vanish, largely attributable to South Korean chip stocks. SK Hynix and Samsung both experienced drops exceeding 12%.
The immediate trigger for the selloff was a report that SK Hynix, which had just surpassed Samsung as Korea’s most valuable company, might be shifting production from high-margin, AI-specific high bandwidth memory (HBM) to more commoditized DRAM. While some analysts interpret this as opportunistic due to rising DRAM prices, others view it as a potential sign of weakening AI memory order books. Despite the market's jitteriness, some analysts like David Faber and Sara Eisen believe the broader AI ecosystem's growth, spending, and capital expenditure picture remains intact, with demand for AI still strong.
Upcoming earnings reports from companies like Micron, Cerebras, NVIDIA (which recently reported $81.6 billion in revenue with Data Center up 92% and guided next quarter to $91 billion), and Broadcom (with $10.8 billion in AI semi revenue, up 143%, and guided to $16 billion next quarter) are now under intense scrutiny. These results will be crucial in determining whether the recent market movements signify a fundamental breakdown in AI demand or merely a market adjustment after an impressive run, with chip stocks having risen over 100% in the past year.
