Global chip stocks plunged across multiple time zones on Tuesday as a broad technology downturn rippled from Asia through Europe and pressured U.S. futures ahead of the open. Investors cited rising anxiety over stretched AI-related valuations and the prospect of higher U.S. interest rates, which together undercut the thesis that heavy debt-funded spending on AI infrastructure can continue to justify current equity prices.
In South Korea, the rout was most pronounced. Samsung Electronics and SK Hynix - which together constitute roughly half of the Kospi benchmark’s market capitalisation - each fell more than 12%. The declines were severe enough to force a 20-minute trading halt on the Kospi, the fourth such suspension this year, leaving the index down 10% on the day.
Japan’s market also suffered meaningful losses, with the Nikkei Stock Average closing 3.55% lower. The selling then extended into Europe where chip-equipment and device names moved sharply lower; ASML slid more than 5% by 04:35 ET (08:35 GMT), while Infineon, ASM International and STMicroelectronics each lost between 5% and 8%.
U.S. premarket indicators pointed to a difficult open. Micron fell more than 8% in premarket trade, while Intel and Marvell Technology each dropped around 7.8%. Nvidia, AMD and TSMC were down in the mid-single digits, losing between 3% and 7%. The iShares Semiconductor ETF fell 4.6%.
Index futures showed broad weakness: Nasdaq 100 futures fell 2.7%, leading Wall Street contracts lower; S&P 500 futures were down 1.4% and Dow futures slipped 0.6%.
Other technology-linked names also weakened. SpaceX shares slipped more than 4% in premarket trading, extending losses after a $400 billion selloff on Monday that erased much of the gains from its recent market debut.
Market participants have moved swiftly to price in a more aggressive U.S. policy path. Traders are now pricing in 50 basis points of Federal Reserve rate increases by December, double the expectation from two weeks ago, as investors adjust to a more hawkish policy stance under new Federal Reserve Chair Kevin Warsh. The higher expected borrowing costs raise the bar for justifying lofty valuations, particularly for companies tied to capital-intensive AI infrastructure.
Valuation pressure has been growing after a sharp rally earlier this quarter that followed the Middle East ceasefire. That momentum briefly pushed the sector to new highs - the Philadelphia SE Semiconductor Index hit a record high just a day before the rout - but Tuesday’s pullback underlined the fragility of those gains when macro expectations shift.
Market attention will turn to company-level catalysts this week. Micron is due to report its latest quarterly results on Wednesday, and investors will be watching closely for fresh information on the demand outlook for memory and AI-specific chips.
Summary
Chip stocks plunged across Asia, Europe and U.S. premarket trade on Tuesday as worries about stretched AI valuations and rising expectations for U.S. interest rates forced investors to pare exposure to technology. Memory companies in South Korea led losses, prompting a temporary trading halt, while major European equipment and device suppliers also saw steep declines. Futures signalled further weakness into the U.S. session.
Key points
- Memory giants Samsung Electronics and SK Hynix each fell more than 12%, prompting a 20-minute Kospi trading halt and leaving the index down 10% on the day.
- European chip-equipment and device stocks such as ASML, Infineon, ASM International and STMicroelectronics slid between 5% and 8% in early trade.
- U.S. premarket weakness was broad: Micron dropped over 8%, Intel and Marvell fell around 7.8%, and major names including Nvidia, AMD and TSMC declined between 3% and 7%.
Risks and uncertainties
- Rising U.S. rate expectations - Traders are pricing in 50 basis points of Fed rate hikes by December, increasing financing costs and potentially cooling investment in capital-intensive AI infrastructure.
- Valuation sensitivity - AI-related multiples appear stretched after a recent rally, making the sector vulnerable to rapid re-rating if growth or spending assumptions change.
- Event-driven volatility - Near-term corporate catalysts, such as Micron’s quarterly results due Wednesday, could introduce additional volatility if they reveal weaker demand for memory and AI chips.