Global Semiconductor Rout Deepens as AI Earnings Fail to Meet Expectations

A massive sell-off in semiconductor stocks intensified this week as disappointing earnings from major Asian suppliers fueled fears of an AI bubble. South Korea's SK Hynix saw its shares plunge more than 14% after missing analyst estimates, despite posting a record quarterly profit. The disconnect between "record earnings" and "missed expectations" suggests that Wall Street's pricing for AI-linked growth has reached extreme levels.

The contagion spread rapidly across Asian and European markets. SoftBank Group, a major proxy for AI sentiment through its stake in Arm, dropped over 7%, while Japan’s Tokyo Electron and Advantest both slid more than 10%. In China, the Hang Seng Semiconductor Index fell 7%, reflecting a global reassessment of the valuation premium placed on chipmaking equipment and fabrication.

In the United States, major players like Intel and AMD suffered losses of 6% and 8% respectively. Even ASML, the lithography giant, faced pressure following reports that Chinese competitors are successfully manufacturing homegrown deep ultraviolet (DUV) chipmaking tools. The sector-wide rout has wiped out billions in market value, with the focus now shifting to whether the extreme capital spending by Big Tech can deliver the promised efficiency gains.

Nvidia CEO Jensen Huang attempted to calm nerves by stating that AI is fundamentally reshaping the industry, driving a need for a much larger global chip supply chain. However, market participants are increasingly wary of "circular financing" where chipmakers invest in the very startups that are buying their products. This skepticism is leading to a broader rotation out of growth-oriented tech into value sectors.