A sharp sell-off in semiconductor stocks has spread from Asian markets to Wall Street, fueling debate over whether the artificial intelligence boom that drove a year-long rally in tech shares is entering a correction phase. The tech-heavy Nasdaq closed about 9% below its June record high on Wednesday, dragged lower by worries over heavy AI spending and disappointing signals from chip makers.
South Korean semiconductor giants have borne the brunt of the sell-off. SK Hynix, a key supplier of high-bandwidth memory chips used in AI data centers, has plunged 46% over the past month. Samsung Electronics, the world’s largest memory chip maker, has lost 35% of its value in the same period. The declines come despite both stocks having gained threefold and fivefold respectively over the past year during the AI-driven rally.
Analysts say the retreat reflects a combination of profit-taking after extraordinary gains and growing skepticism about the pace at which AI infrastructure investments will generate returns. While companies continue to pour hundreds of billions of dollars into data centers and specialized chips, revenue growth from AI products has yet to match the scale of capital expenditure.
US tech shares have not been spared. Google and Tesla both saw sharp but brief plunges last week after the companies pledged to spend billions more on AI development despite the technology not yet delivering significant profits. Both stocks have since partially recovered, but the volatility underscores mounting investor unease.
This week’s earnings reports from Meta, Microsoft, and Amazon have given markets a closer look at how deeply the biggest technology firms are betting on AI. Meta shares fell after the company signaled plans to sell AI tools to other businesses for the first time, while Microsoft’s 7% jump earlier in the month reflected investor optimism about AI-driven cloud demand.
Russ Mould, investment director at AJ Bell, said there remains a healthy degree of skepticism about whether AI investments can generate a commensurate level of return. He added that investors are beginning to demand clearer evidence that the spending spree will translate into bottom-line growth.
Despite the pullback, leading tech investors argue that this is not yet a serious reckoning. The underlying thesis that AI represents a transformative technology comparable to the advent of the internet or electricity remains intact, they say, and the current sell-off may represent a necessary consolidation after an overheated rally.
The South Korean stock market, notoriously volatile, triggered circuit breakers as the KOSPI index plummeted earlier this month. The spillover has raised concerns about broader financial stability in Asia, though most analysts view the correction as sector-specific rather than systemic.