Chip firms fall in US and Asia as AI jitters rattle investors
Shares in major chip companies fell sharply across the US and Asia on Tuesday as a sell-off in artificial intelligence-related stocks deepened, raising fresh doubts about the sustainability of the AI investment boom. The rout was severe enough to trigger a temporary trading halt on South Korea's Kospi index, and pushed Nvidia out of its position as the world's most valuable listed company, with Apple overtaking it instead.
South Korea's Kospi was paused after falling 8%, then dropped around 10% once trading resumed, led by Samsung Electronics and SK Hynix, both down more than 10%; the index has now lost about a third of its value since mid-June after more than doubling earlier in the year. Japan's Nikkei 225 fell almost 4.5%, while Nvidia had already dropped 5% in New York on Monday following reports it is in talks to provide around $250bn towards an OpenAI data-centre project. Some analysts have questioned whether AI investment on this scale can ever generate sufficient returns.
In short
- Chip stocks slump across US and Asia amid AI investment doubts
- South Korea's Kospi briefly halted after 8% plunge
- Apple overtakes Nvidia as world's most valuable company
Steelman: both sides, in good faith
The strongest fair case each way — we don't pick a winner.
The case for
Those more sanguine about the sell-off argue that a sharp correction after months of extraordinary gains, particularly on the Kospi which had more than doubled earlier in the year, is a healthy repricing rather than evidence the AI story is broken. They point out that underlying demand for advanced chips remains robust, that firms like Nvidia are still being asked to commit hundreds of billions to real infrastructure projects such as the OpenAI data-centre plan, and that markets routinely overshoot in both directions before settling on a more sustainable valuation that still reflects genuine long-term growth.
The case against
Sceptics contend that the scale of the falls, severe enough to halt trading in Seoul and to dethrone Nvidia as the world's most valuable company, is a warranted reckoning with years of speculative excess. They argue that when analysts openly question whether spending on the scale of a $250bn data-centre commitment can ever be recouped, investors are right to reassess whether AI valuations have run far ahead of demonstrable revenue, and that a painful correction now is preferable to a larger crash later built on unexamined assumptions about the technology's returns.
Explained simply
Artificial intelligence is computer technology that learns and performs tasks automatically. The tech world has invested heavily in AI systems in recent years, with most AI development depending on advanced computer chips that provide the enormous computing power required.
The largest chipmakers in the world include companies like Nvidia, Samsung and SK Hynix. As AI has become more important, investors have bet heavily on these firms, expecting demand for their chips to grow substantially.
A fundamental question has emerged about whether the enormous sums being poured into AI can generate sufficient financial returns. Some investors and analysts question whether the technology can produce profits large enough to justify this level of investment.
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