Global Chip Stocks Wiped Out Tuesday: Micron, SK Hynix ADRs Plunge Over 8%, SanDisk Tumbles 13%

Global chip stocks were brutally hammered on Tuesday (28th), as tech giants continue pouring massive funds into expanding artificial intelligence (AI) infrastructure, prompting markets to reassess the financing pressures and profit outlook of such investments. Added to this, the rapid rise of China's chip industry has further intensified investor concerns over sector competition.

U.S. chip stocks extended Monday's losses on Tuesday, with selling pressure intensifying. Memory and storage stocks were hit first: Micron (MU-US), SK Hynix ADR (SKHY-US), and Seagate Technology (STX-US) all plunged over 8%, Western Digital (WDC-US) dropped nearly 7%, and SanDisk (SNDK-US) collapsed more than 14%.

Intel (INTC-US) closed down nearly 6%, while AMD (AMD-US) tumbled 8%. AI leader Nvidia (NVDA-US) opened lower but recovered to close nearly flat.

Broad-based selling dragged the Philadelphia Semiconductor Index down nearly 5%, hitting a low not seen in over two months, signaling that markets are rapidly unwinding positions that had previously benefited heavily from the AI theme.

This trend followed earlier massive sell-offs in Asian markets.

In South Korea, the Kospi index dropped 8% intraday on Tuesday, triggering the eighth circuit breaker of the year. After trading resumed, the decline accelerated, ending the session down 10.8%.

SK Hynix closed down 14.65%, Samsung Electronics plunged over 13%. Other AI-related firms also faced heavy selling: Samsung SDI fell 11.37%, LG Innotek dropped 16.29%, Seoul Semiconductor declined 8.78%, and LG Chem fell 7.5%.

Japanese semiconductor stocks also declined. Tokyo Electron closed down 10.96%, Advantest dropped over 10%; SoftBank Group, seen as a major AI investment play due to its stake in Arm, fell 4.43%. Japanese memory manufacturer Kioxia plunged over 18%.

Taiwan's market also weakened, with TSMC, the world's leading foundry, down nearly 3%. China's ChiNext 300 Index, heavily weighted in tech stocks, fell 6.49%, while the Hang Seng Mainland China Semiconductor Index dropped 7.02%.

Selling pressure then spread to Europe, with major chip firms continuing their decline. Earlier, The Information reported that a Chinese company is manufacturing immersion deep ultraviolet (DUV) lithography equipment—a market long dominated by ASML (ASML-US). ASML's stock had already plunged over 8% on Monday and fell another 2.9% on Tuesday.

Other chip equipment stocks also came under pressure, with ASM International and Besi Semiconductor falling between 5.31% and 3.56%.

The downturn began on Monday, highlighting the high correlation between U.S. and Asian tech stocks.

The chip stock selloff started on Monday. Nvidia dropped about 5%, losing its position as the world's most valuable publicly traded company to Apple (AAPL-US), whose stock has risen about 25% year-to-date.

Amid weakening market sentiment, The Wall Street Journal reported that Nvidia is in talks to provide around $250 billion in funding for a large data center project linked to OpenAI. This news heightened investor focus on the funding sources for AI infrastructure and whether tech companies must take on more debt to sustain their current expansion pace.

Beyond AI investment financing, the accelerating development of China's semiconductor industry has become another market concern. Analysts believe that continued progress in Chinese chip technology, combined with local firms expanding capacity and capital, could gradually shift the competitive landscape of the global chip market.

China's memory chip manufacturer ChangXin Memory Technologies (CXMT) listed in Shanghai on July 27, with its stock surging 466% on its first trading day, making it Asia's largest IPO this year.

CXMT raised $8.6 billion in its IPO, reaching a post-listing market cap of RMB 3.3 trillion (approximately $487.73 billion), nearly half the market value of U.S. memory giant Micron. With this massive capital injection, markets now worry that Chinese firms could accelerate production, pressuring global memory prices and existing suppliers' market share.

Meanwhile, credit markets are also sounding alarms over tech's massive AI spending.

According to data from London Stock Exchange Group (LSEG), credit default swap (CDS) costs for Oracle (ORCL-US), SpaceX, Alphabet (GOOGL-US), Amazon (AMZN-US), Meta (META-US), Broadcom (AVGO-US), and Nvidia have recently hit record highs.

Rising CDS costs mean investors are paying more to insure against corporate debt default, reflecting growing caution over these companies' financial stress. Recently, bonds issued by large-scale cloud service providers have also faced selling pressure, as these firms are investing hundreds of billions of dollars in data centers, chip procurement, and AI model development, partly funded by increased debt issuance.

Wall Street Analysis

SK Hynix is a key supplier of high-bandwidth memory (HBM) to Nvidia and a major beneficiary of the recent AI capital expenditure boom. Since its stock price had already priced in strong AI growth expectations, any shift in market confidence could trigger sharp corrections.

Owen Lamont, Senior Vice President at Acadian Asset Management, said SK Hynix's volatile stock reflects ongoing uncertainty about the AI investment cycle. Investors still struggle to grasp how this technology will ultimately impact the broader economy.

Lamont stated: "We are facing enormous uncertainty. No one knows how AI development will affect the economy, so market movements are likely to remain bumpy regardless."

He further noted that leveraged exchange-traded products may be amplifying market volatility, though they are not the sole cause of SK Hynix's recent swings.

Lamont added: "More broadly, the entire leveraged ETF ecosystem in South Korea, Hong Kong, and the U.S. could increase volatility and magnify price swings."

John Aylward, CIO at Sona Asset Management, commented that credit markets value predictability, but the scale and duration of AI infrastructure spending remain highly uncertain, clearly undermining investor confidence.

Sundeep Gantori, Head of Equity Strategy at Standard Chartered, observed that recent media reports focusing on China's ambitions in memory chips and lithography equipment have further soured market sentiment toward semiconductor stocks.

However, he believes the industry's long-term outlook remains unchanged. Gantori said: "The market opportunity is still large enough for multiple players to benefit and coexist." He believes the AI investment cycle will continue to support major tech firms.

He also noted: "Another reason for Korea's market weakness today is that some brokerage reports predict memory prices will peak in 2027, which isn't far from our view."

Standard Chartered also expects memory prices to peak next year, but Gantori emphasized: "What truly matters is the risk-reward balance. Given current valuations, the risk-reward profile has improved."