Analysis
The semiconductor selloff that started with a single bad SK Hynix session last week has become a two-day rout that's erased roughly $1.5 trillion in sector value since June 25. SK Hynix fell another 14.7% on Wednesday and Samsung dropped 13.4%, extending losses to 47% and 38% respectively from their late-June peaks. The pain has spread west: in US premarket trading Wednesday, Micron fell more than 5%, AMD and Intel each dropped over 4% on top of AMD's near-9% slide the prior session, and Nvidia slipped roughly 1% after already losing 5% on Monday.
Three things are converging to drive it. First, ChangXin Memory Technologies' debut on Shanghai's STAR Market surged 466% to a $480 billion valuation, instantly making CXMT China's most valuable listed company and reviving fears that Chinese memory makers are closing the gap with SK Hynix and Samsung faster than priced in. Second, reports surfaced that a Chinese state-backed firm has begun mass-producing lithography equipment domestically, chipping at the export-control moat Western chipmakers have relied on. Third, and most consequential for the AI trade specifically: reports that Nvidia is in talks to backstop up to $250 billion of financing for OpenAI's planned 10-gigawatt Ohio data center campus have investors questioning whether AI infrastructure spending commitments are becoming circular -- chipmakers financing their own customers' demand.
“Alphabet took the opposite hit on July 23 when its own capex raise came with negative free cash flow.”
The rout is now colliding directly with this week's Big Tech earnings, and the market is drawing sharp distinctions. Microsoft's stock jumped 7% after hours Wednesday on its own FY2027 capex raise to $255-260 billion, even as chip suppliers cratered on spending-discipline fears -- investors are rewarding hyperscalers with proven cloud revenue funding the spend while punishing pure-play chip suppliers exposed to sentiment swings and Chinese competition. Alphabet took the opposite hit on July 23 when its own capex raise came with negative free cash flow.
For comparison, this is now a larger drawdown than the January 2025 DeepSeek-driven chip selloff, though it's unfolding over weeks rather than a single session. The bear case: if the Nvidia-OpenAI financing talks fall apart or get scaled back, it removes one of the demand signals propping up the entire AI capex thesis, and Chinese competition in memory and lithography is a multi-year structural risk, not a one-week story. What to watch: Amazon's Thursday earnings, whether the Nvidia-OpenAI backstop talks firm up into an actual signed deal, and whether Wednesday's Microsoft pop marks a floor for hyperscaler-adjacent names even as pure chip suppliers keep bleeding.
