Micron and SK Hynix share prices sank amid concerns over oversupply and margin pressure in HBM and DRAM sectors tied to AI buildout cycles.
Semiconductor stocks fell sharply on Tuesday, with the PHLX Semiconductor Index dropping more than 3% as investors continued to unwind positions in one of the market's hottest AI-driven sectors this year. US-listed shares of memory and storage leaders Micron Technology and SK Hynix tumbled more than 8%, while SanDisk dropped 13%. Among semiconductor equipment makers, ASML, Applied Materials, and Lam Research also declined.
AI chip heavyweight Nvidia reversed early morning losses to climb into positive territory following a 5% drop on Monday. Peer AMD fell more than 7%, while chipmakers Intel, Marvell, and Qualcomm also slid.
The sell-off followed declines in semiconductor stocks abroad. In South Korea, SK Hynix fell more than 14%, while Samsung Electronics dropped more than 13%. European semiconductor stocks also moved lower as concerns about circular financing and intensifying competition from China weighed on the sector.
On Monday, Nvidia lost its position as the world's most valuable company to Apple after a report indicated the AI chip heavyweight was in talks to backstop $250 billion in funding for OpenAI tied to a major data center project. That report followed a $500 billion strategic collaboration with conglomerate SK Group, announced on Friday.
Chinese memory maker CXMT's blockbuster debut in Shanghai this week renewed investor concerns that the company's rapid expansion could weigh on memory chip prices. Additionally, a report from The Information that a Chinese state-backed company began mass-producing a key piece of chipmaking equipment fueled a sell-off in ASML shares.
Semiconductor stocks have been at the center of the AI trade this year, helping propel the sector to a record high in June. Since then, chip stocks have tumbled into bear-market territory, falling more than 20% from their highs as investors grow increasingly concerned about hyperscalers' massive AI spending spree.
Investors have also become more skeptical about the payoff from billions of dollars in AI infrastructure investments, raising questions about whether the spending will generate adequate returns. Last week, Alphabet stock plummeted after the tech giant announced it would raise its capital spending outlook as it builds out its AI infrastructure.
Investors are now awaiting earnings this week from Microsoft, Amazon, and Meta, all of which are expected to announce further increases in AI-related spending. Any hint of a slowdown would spell trouble for semiconductor and equipment makers. Concerns that the Federal Reserve could resume raising interest rates have also weighed on sentiment.