AI Chip Stocks Plunge on Chinese Competition and Questions Over AI Spending
Market Reactions and Industry Developments
A look at the day ahead in European and global markets from Tom Westbrook
Asian Markets Respond to AI Chip Uncertainty
Chip stocks tanked across Asia on Tuesday, spooked by the twin threats of rising Chinese competition and mounting questions about the funding and longevity of the AI infrastructure boom.
South Korea's KOSPI fell nearly 10% and tripped a circuit breaker, and Japan's Nikkei fell 4.4%. Both markets have done so well in the rally that they are still year-to-date leaders, though they now scrape multi-month lows.
Nvidia and the AI Infrastructure Boom
On Monday, Nvidia slid 5% on a Wall Street Journal report that the chipmaker was in talks to provide roughly $250 billion in financing guarantees for an OpenAI data centre.
The report said the guarantee would not cover Nvidia chips inside the centre, but that financing OpenAI chip purchases worth up to $350 billion was also under discussion, throwing a spotlight on the increasingly circular nature of AI build-out spending.
European Chipmakers Face New Competition
Europe's chip champion was not spared either. ASML slumped 8.5% after The Information reported that China has begun producing domestically developed immersion deep ultraviolet lithography machines, a critical chipmaking technology long dominated by the Dutch group.
China's Semiconductor Industry Emerges
That development, coupled with the stellar debut of CXMT Corp, has investors wondering whether China's semiconductor industry is moving from catch-up mode to genuine contender status. CXMT rocketed to the top of China's stock market by valuation on Monday, fanning worries that dominant chip makers may need to share the AI spoils more widely.
Reuters reported last week that Apple had sought U.S. assurances that CXMT wouldn't be added to a trade blacklist.
Upcoming Earnings and Broader Market Factors
Big Tech Earnings in Focus
Earnings at Apple, Meta, Microsoft and Amazon later this week will round out the picture on hyperscaler spending plans.
Oil Prices and Interest Rate Expectations
Tumbling oil prices, meanwhile, were little salve for stocks or even for bonds, which held steady through Tuesday's Asia session even as crude futures extended losses.
Markets see a roughly 38% chance of a U.S. rate hike this week.
Key Developments to Watch
Key developments that could influence markets on Tuesday:
Economics: France consumer confidence, U.S. consumer confidence
Earnings: Mercedes-Benz, Barclays, Man Group, EssilorLuxottica, Logitech, Rio Tinto, Kering, Ford, Mondelez, Visa, NXP, Seagate, Coca-cola, UPS, Boeing
(Editing by Shri Navaratnam)
