Tech Stocks Tumble as AI Boom Fears Grip Markets; Nvidia Loses Top Spot

The global technology sector experienced a significant downturn Tuesday, with semiconductor stocks crashing worldwide. This sharp decline is attributed to intensifying investor fears regarding the long-term sustainability of the artificial intelligence (AI) boom, just as several major Silicon Valley companies are set to release their financial results this week.

By mid-morning ET, shares of memory chip producers Micron and SanDisk were down over 8%, while Western Digital lost more than 11%. Other major players also suffered substantial losses: Intel fell approximately 6%, Marvell Technology dropped 7.5%, Applied Materials declined around 6.5%, and AMD depreciated by 8.1%. Newly listed U.S. shares of South Korea's SK Hynix were down 6.8%, and Super Micro Computer saw a 7.1% retreat.

The Philadelphia Semiconductor Index, a key barometer for the chip industry, plunged to its lowest level in over two months. The sell-off began Monday when Nvidia's stock dropped 5% on the New York Stock Exchange, causing the AI chip giant to relinquish its title as the world's most valuable listed company. This followed a Wall Street Journal report suggesting Nvidia was in talks to invest approximately $250 billion in a massive data center project associated with OpenAI. Apple has since surpassed Nvidia in market capitalization, with its shares rising about 25% year-to-date.

The market turmoil extended to Asian markets on Tuesday, as investors retreated from companies seen as major beneficiaries of the AI surge. South Korea's Kospi index plummeted about 11%, triggering its eighth trading halt this year. Trading was briefly suspended after an 8% drop, and the index continued to fall, closing down 10.8%. Samsung Electronics and SK Hynix, key components of the Kospi, ended the session down 13% and 15%, respectively. In Japan, the Nikkei 225 index lost 4%, and memory chip maker Kioxia, a strong performer in the first half of the year, depreciated by 18%.

Analysts attribute the market's pullback to several factors, including concerns about the financing of AI investments and increasing competition from China. SK Hynix, a primary supplier of high-bandwidth memory (HBM) chips for Nvidia, has been particularly sensitive to shifts in investor sentiment due to its significant gains during the AI investment wave.