Chipmaker slump hits global markets as investors reassess AI outlook - UAE

Global stock markets tumbled this week as a renewed sell-off in chipmakers prompted investors to reassess the outlook for AI-related capital spending. Memory and semiconductor names led declines: SanDisk plunged 11% on Monday and again yesterday, taking it more than 40% lower over the past month, while SK Hynix and Samsung Electronics slid 14.7% and 13.4% respectively as South Korea’s Kospi fell more than 10% in a single session.

"Worries around funding uncertainties, capex increases and Big Tech cashflow have taken center stage," said Venu Krishna, head of US equity strategy at Barclays, summing up investor concerns that have rippled through tech-heavy markets.

The sell-off spread across the chip supply chain. Western Digital, Micron, Advanced Micro Devices and Intel each lost at least 4% in the latest session, and patterning the move across regions, Europe’s ASML was down about 3%. In Asia, Japan’s Nikkei 225 dropped roughly 4% with Kioxia plunging more than 18%, halving its share price in July. China’s CXMT, which surged 466% on Monday after raising USD 8.5 billion in its Shanghai listing, reversed and fell more than 4% yesterday.

Investors have been spooked by plans from major memory producers to expand capacity even as demand signals and funding lines come under scrutiny. SK Hynix and Samsung each announced intentions to develop two new semiconductor plants to double DRAM production capacity over the next five years — a move that intensified oversupply worries and weighed on share prices, leaving both firms down more than a third in July.

• US technology bellwether Alphabet saw its share price fall 7% in a single session after reporting sharp outflows tied to AI infrastructure spending, highlighting concerns about Big Tech cashflow and the sustainability of AI investments.
• Market breadth showed a broad impact: the Kospi, Nikkei and Shanghai Composite were down in early trading, while the Hang Seng bucked the trend and traded higher.
• Regional market snapshots: ADX 9,835 (-0.1%); DFM 5,790 (-0.9%); TASI 10,678 (-0.9%).

Analysts point to a confluence of factors driving the weakness: rising capital expenditure plans, tighter liquidity and intensifying competition from lower-cost Chinese competitors. "The growing competition from lower-cost Chinese rivals and concerns over Western AI spending drove the sell-off in Asian technology stocks," said Jim Reid, an analyst at Deutsche Bank, citing the recent launch by Chinese AI startup Moonshot of a large language model with capabilities close to leading US developers such as Anthropic.

Despite the rout, some strategists argue demand fundamentals for AI remain intact. "Concerns over rising capital spending and funding needs are driving the sell-off, but demand for AI remains robust, based on the earnings reported so far," said Marija Veitmane, head of Equity Research at State Street.

Still, caution is rising among investors. "Investors are being more cautious regarding the end of the AI boom, with rising credit default swap prices tied to big names serving as evidence of growing concerns," GAM Group CEO Albert Saporta observed, underlining how credit markets are reflecting heightened funding risk for large tech and semiconductor players.

As markets watch upcoming corporate earnings and capital-spending guidance from Big Tech, the immediate outlook will hinge on whether companies can sustain heavy AI investments without triggering a broader liquidity squeeze or a prolonged cycle of oversupply in memory and semiconductor markets.