Micron, SK Hynix stocks sink as AI chip sell-off deepens

Semiconductor stocks tumbled Tuesday, with the PHLX Semiconductor Index falling more than 5%, as investors unwound AI-driven positions amid concerns over circular financing, Chinese competition, and massive AI spending. Micron Technology and SK Hynix shares each dropped over 5%, while Nvidia fell roughly 1% and AMD lost more than 8%, extending a sector sell-off that has pushed chip stocks more than 20% below their June highs.

What happened: Semiconductor stocks accelerated losses on Tuesday, with the PHLX Semiconductor Index ^SOX https://finance.yahoo.com/quote/%5ESOX/ falling more than 5% as investors continued to unwind positions in one of the market's hottest AI-driven sectors this year. AI chip heavyweight Nvidia NVDA https://finance.yahoo.com/quote/NVDA/ stock fell roughly 1%, adding to a 5% loss on Monday, while AMD AMD https://finance.yahoo.com/quote/AMD/ fell more than 8%. Shares of Broadcom AVGO https://finance.yahoo.com/quote/AVGO , Intel INTC https://finance.yahoo.com/quote/INTC , Marvell MRVL https://finance.yahoo.com/quote/MRVL , and Qualcomm QCOM https://finance.yahoo.com/quote/QCOM/ all slid. US-listed shares of memory and storage leaders Micron Technology MU https://finance.yahoo.com/quote/MU/ , SK Hynix SKHY https://finance.yahoo.com/quote/SKHY/ , and Sandisk SNDK https://finance.yahoo.com/quote/SNDK/ all fell more than 5%. Among the semiconductor equipment makers, ASML ASML https://finance.yahoo.com/quote/ASML/ , Applied Materials AMAT https://finance.yahoo.com/quote/AMAT , and Lam Research LRCX https://finance.yahoo.com/quote/LRCX/ also dropped. What's behind the move: The sell-off followed declines in semiconductor stocks abroad. In South Korea, SK Hynix fell more than 14%, while Samsung Electronics 005930.KS https://finance.yahoo.com/quote/005930.KS/ dropped more than 13%. European semiconductor stocks also moved lower as concerns about circular financing and intensifying competition from China have weighed on the sector. On Monday, Nvidia lost its position as the world's most valuable company https://finance.yahoo.com/markets/article/nvidia-drops-nearly-5-leading-chip-stocks-lower-amid-renewed-worries-of-circular-financing-193309793.html to Apple after a report said the AI chip heavyweight was in talks to backstop $250 billion in funding for OpenAI OPAI.PVT https://finance.yahoo.com/quote/OPAI.PVT/ tied to a major data center project. That report followed a $500 billlion strategic collaboration https://nvidianews.nvidia.com/news/sk-group-and-nvidia-expand-strategic-partnership-across-ai-factories-and-next-generation-memory with the conglomerate SK Group, announced on Friday. Chinese memory maker CXMT's 688825.SS https://finance.yahoo.com/quote/688825.SS/ blockbuster IPO in Shanghai this week also renewed investor concerns that the company's rapid expansion could weigh on memory chip prices. Additionally, a report from The Information that a Chinese state-backed company began mass-producing a key piece of chipmaking equipment fueled a sell-off in ASML shares. What else you need to know: Semiconductor stocks have been at the center of the AI trade this year, helping propel the sector to a record high in June. Since then, chip stocks have tumbled into bear-market territory, falling more than 20% from their highs as investors grow increasingly concerned about hyperscalers' massive AI spending spree. Investors have also become more skeptical about the payoff from billions of dollars in AI infrastructure investments, raising questions about whether the spending will generate adequate returns. Last week, Alphabet GOOG https://finance.yahoo.com/quote/GOOG/ , GOOGL https://finance.yahoo.com/quote/GOOGL/ stock plummeted after the tech giant announced it would raise its capital spending outlook as it builds out its AI infrastructure. Investors are now awaiting earnings this week from Microsoft MSFT https://finance.yahoo.com/quote/MSFT/ , Amazon AMZN https://finance.yahoo.com/quote/AMZN/ , and Meta META https://finance.yahoo.com/quote/META/ , all of which are expected to announce further increases in AI-related spending.