AI sell-off intensifies as investors ditch chip stocks

A sell-off in AI stocks intensified on Tuesday, driving South Korea's Kospi index to its lowest level since mid-April, as investors dumped chip stocks amid concerns over AI companies' borrowing for datacentre expansion and competition from cheaper Chinese firms. SK Hynix and Samsung Electronics fell more than 10%, while Nvidia shares dropped 5% after reports of talks to provide $250bn for an OpenAI datacentre project. Analysts called the sell-off a kneejerk reaction, citing China's mass production of homegrown DUV chip-making tools as a key factor.

The sell-off in AI stocks has intensified, driving South Korea’s stock market down to its lowest level in three months. Investors continued to ditch chip stocks on Tuesday, amid rising concerns about the huge amount of borrowing among AI companies to fund their datacentre expansion plans. The South Korean semiconductor companies SK Hynix and Samsung Electronics fell by more than 10%, dragging the country’s Kospi share index down to its lowest point since mid-April. Analysts attributed the sell-off to renewed worries over AI investment spending, and competition from cheaper Chinese companies, after a report by the Information https://www.theinformation.com/articles/china-starts-mass-producing-homegrown-duv-chipmaking-tools-advance-local-chip-industry that China has begun mass production of homegrown deep ultraviolet DUV chip-making tools. “We believe the market was likely spooked by the progress of China’s chip-making equipment capabilities, and was worried that this progress would threaten the competitive position of global chip making and chip equipment leaders,” said Jing Jie Yu, an equity analyst at Morningstar, adding that the sell-off was “largely a kneejerk reaction and overdone”. On Monday, shares in the Chinese memory chip maker CXMT rose by 466% when it floated on the Shanghai stock exchange, underlining China’s drive to create its own AI supply chain. Investors may also be growing jittery about the “circular funding” at the heart of the AI industry https://www.theguardian.com/technology/2026/feb/05/disapperance-100bn-deal-ai-circular-economy-funding-nvidia-openai , through which artificial intelligence firms finance one another. On Monday, the Wall Street Journal reported that Nvidia https://www.theguardian.com/technology/nvidia was in discussions with OpenAI about providing $250bn £188bn for a massive datacentre project in Ohio. Backing from Nvidia, which has an investment grade credit rating, could make it less expensive to raise funding for the project. News of the talks knocked Nvidia’s shares on Monday; they closed 5% lower, while the cost of insuring the chip company’s debt against default using a credit default swap CDS rose. “The market reaction to the Nvidia news was swift. Nvidia fell 5% and closed the session below the $200-per-share mark. More importantly, Nvidia’s five-year CDS spiked, suggesting that it may not yet be the right time to buy the dip,” said Ipek Ozkardeskaya, a senior analyst at Swissquote.