Semiconductor shares tumbled for a second straight session as investors grew increasingly wary of the ballooning costs of financing artificial intelligence infrastructure and intensifying competition from Chinese chipmakers.
Memory-chip makers led the declines, with Micron Technology and South Korea’s SK Hynix both falling sharply as the broader sector sell-off deepened. Losses spread across the industry, dragging down major indexes weighted toward technology names.
The retreat reflects mounting unease over how the enormous capital commitments required to build out AI data centers will be funded, and whether current spending can generate returns quickly enough to justify sky-high valuations. Much of the recent rally in chip stocks had been driven by expectations of relentless demand for AI-related hardware.
Concerns over Chinese competition added to the pressure. Domestic firms in China have made rapid strides in advanced chip design and manufacturing, raising questions about the long-term pricing power and market share of established players in both logic and memory segments.
Memory chips have been a particular focus of the AI trade, as the technology underpinning large language models relies heavily on high-bandwidth memory. That exposure has made companies like Micron and SK Hynix especially sensitive to shifts in sentiment around the durability of AI-driven demand.
The latest declines echo earlier bouts of volatility that have rattled the sector this year. In April, chipmakers slid on tariff anxieties and doubts over AI growth, underscoring how quickly investor confidence in the trade can reverse.
The turbulence comes despite a wave of large deals aimed at securing supply for the AI boom. Recent agreements have seen major memory producers commit hundreds of billions of dollars to expand capacity, reflecting long-term optimism that sits uneasily alongside the sector’s near-term swings.
Analysts suggest the current pullback may represent a repricing of risk rather than a fundamental shift in demand, as markets weigh the gap between AI ambitions and the practical challenge of financing them.
For now, the sell-off highlights how sensitive semiconductor valuations remain to any signal that the AI spending cycle could slow or that competitive pressures could erode margins. Investors are likely to scrutinize upcoming earnings reports and capital-expenditure guidance closely for confirmation that demand remains intact.