Semiconductor stocks sink over fears of increased competition from China

Semiconductor stocks fell in early trading Monday, with the PHLX Semiconductor Index declining 2% amid fears of increased competition from China, as Micron Technology and SK Hynix shares tumbled around 4% and Nvidia dropped 1%. The selloff followed Alibaba's unveiling of its most powerful AI model, Qwen3.8-Max, and a research firm's note that DeepSeek's latest model is more than 100 times cheaper to run than Anthropic's Claude Fable 5, highlighting intense competition in affordable AI development.

What happened: Semiconductor stocks fell in early trading on Monday, with the PHLX Semiconductor Index declining 2% as fears of increased competition from China spread across the sector. US-listed shares of memory and storage leaders Micron Technology MU https://finance.yahoo.com/quote/MU/ and SK Hynix SKHY https://finance.yahoo.com/quote/SKHY/ tumbled around 4%. AI chip heavyweight Nvidia NVDA https://finance.yahoo.com/quote/NVDA/ stock dropped 1%. Peer AMD AMD https://finance.yahoo.com/quote/AMD/ fell more than 2%. Chip maker Intel INTC https://finance.yahoo.com/quote/INTC , along with Marvell MRVL https://finance.yahoo.com/quote/MRVL and Qualcomm QCOM https://finance.yahoo.com/quote/QCOM/ , also slid. 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/ dropped. What's behind the move: The move in semiconductors came after China's Alibaba BABA https://finance.yahoo.com/quote/BABA/ unveiled its most powerful AI model yet, Qwen3.8-Max. Meanwhile, a research firm https://www.investing.com/news/stock-market-news/deepseeks-new-ai-model-is-by-far-the-cheapest-of-wellknown-models-to-run-research-firm-says-4829818 noted that China-based AI developer DeepSeek's latest model is more than 100 times cheaper than Anthropic's Claude Fable 5. The developments highlight intense competition among Chinese tech firms to develop advanced AI systems that are both powerful and affordable. W hat else you need to know: Chinese AI companies are betting that open-weight AI models will give developers greater access and flexibility compared with the closed-source approach used by OpenAI, Anthropic, and Alphabet's Google. The debate has been the focus of Silicon Valley in recent weeks. https://finance.yahoo.com/technology/ai/articles/openai-scared-open-weight-models-193325862.html 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. Worries about China's advancement in AI, driven by less expensive models, have also weighed on the AI infrastructure trade. Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on X at @ines ferre . Click here for in-depth analysis of the latest stock market news and events moving stock prices Read the latest financial and business news from Yahoo Finance