Nvidia kicked off a sharp decline in chip stocks on July 27, falling 5% after reports surfaced about complex financing deals worth up to $250 billion tied to AI infrastructure. This triggered a widespread selloff that dragged the South Korean KOSPI index down nearly 10%, activating a market circuit breaker, while Japan’s Nikkei dropped 4.4% on July 28.
Adding to the pressure, ASML, the Dutch manufacturer of advanced lithography machines key for chip production, lost 8.5%. The company faces new competition as China reportedly pushes forward with developing its own immersion DUV lithography tech, potentially reducing reliance on Western suppliers and reshaping the semiconductor supply chain.
The semiconductor sector has been under stress for weeks. The SOX index entered bear market territory in mid-July, retreating about 20% from its June highs. Meanwhile, China's CXMT Corp made a strong debut on the Shanghai stock exchange, topping valuations and signaling a shift in market dynamics.
This slump unsettles crypto markets too. Many AI-related crypto tokens, including those backing decentralized computing and GPU marketplaces, hinge on ongoing AI investment growth. A slowdown in AI spending challenges these tokens’ value propositions and could ripple across crypto mining, where GPUs supplied by companies like Nvidia are vital.
China’s strides in chipmaking add geopolitical complexity, with potential impacts on global supply and pricing that could affect proof-of-work mining economics and AI compute networks worldwide.
The selloff highlights growing concerns about the sustainability of AI’s capital expenditure boom and its wider impact on risk assets.
US chip stocks fell sharply, with Nvidia ending the session down 5%, amplifying volatility in tech-focused markets.
