Chip Stocks Lose $1 Trillion Amid AI Spending Fears
Global semiconductor stocks plummeted as investors questioned the returns on AI infrastructure spending and feared further U.S. Federal Reserve interest rate hikes.
The global technology sector is facing a severe correction, with chip stocks on track to lose over $1 trillion in market value. The Philadelphia Semiconductor Index fell 3.1% on Wednesday, marking its sixth consecutive session of declines and a total drop of roughly 10%. This sell-off was triggered by a combination of higher-than-expected U.S. inflation data, which pushed Treasury yields above 5%, and a reported revenue miss by OpenAI that catalyzed the unwinding of crowded tech positions.
RBC Capital Markets downgraded the technology sector from overweight to market weight, citing a deceleration in earnings sentiment for semiconductors. Deutsche Bank and Jefferies issued similar warnings, with analysts suggesting the risk-reward profile for tech is no longer favorable and warning of potential capital destruction from massive AI expenditures. The International Monetary Fund warned that the consequences of such an AI correction could be global.
The rout extended into Asian markets on Thursday. South Korea's SK Hynix plunged over 10% and Samsung Electronics fell 7.1%, while Japan's SoftBank Group tumbled 7.9%. These declines were exacerbated by news of chip design progress from China's ChangXin Memory Technologies. Broadcom CEO Hock E. Tan warned that financing costs may now pose a greater headwind to AI expansion than physical shortages of chips or electricity. Investors are now monitoring an Anthropic event in San Francisco for signals regarding the future appetite for AI spending.
