U.S. Tech Rout Rattles Global Markets as AI Chip Stocks Lead Losses

The AI boom has driven hyperscalers to spend hundreds of billions of dollars on data centers and semiconductors, powering a sharp rally in chip stocks while stretching valuations and balance sheets. Investors are now scrutinizing whether returns can justify the outlays. Nvidia’s role as both a supplier to OpenAI and a potential financier of its purchases has sharpened fears of “circular financing,” in which vendors help fund demand that supports their own revenue, leaving the sector more exposed if borrowing costs rise or AI spending slows.

On July 28, the Philadelphia Semiconductor Index fell 3.5% intraday, with Micron down 8.8%, Intel 4.6% and SanDisk 13%. Nvidia had dropped about 5% on July 27 after reports it could guarantee roughly $250 billion of financing for an OpenAI data-center project in Ohio and separately finance $350 billion of chip purchases. Bitcoin slid 3.1% to about $63,495. Traders assigned a 28% probability to a Federal Reserve rate increase on July 29, while Microsoft, Amazon, Meta and Apple were due to report earnings during the week.

U.S. President Donald Trump sent a strong military warning to Iran, heightening geopolitical risks and concerns over energy supplies. Meanwhile, the U.S. Bureau of Labor Statistics said the consumer price index rose to a three-year high in May, fueling fears that the Federal Reserve could delay interest-rate cuts and putting highly valued AI and semiconductor stocks at the forefront of the selloff.

Major U.S. stock indexes fell across the board after Trump recently threatened to strike Iran hard, while Taiwan index futures lost more than 700 points in overnight trading. Super Micro Computer shares plunged more than 27%. Analysts said traders were selling AI-related stocks to reserve funds for SpaceX's IPO, although its fundraising target and listing date have yet to be announced.