AI Chip Stocks Suffer as Wall Street Questions Sustainability of AI Investment Boom
On Friday, July 18, Wall Street ended the week with a significant drop, as a relentless selloff in artificial intelligence chip stocks spread across global markets. This resulted in the erasure of billions in market value and raised serious questions about the sustainability of the AI investment supercycle.
The Dow Jones Industrial Average fell approximately 486 points (0.9%), the S&P 500 dropped 1.1%, and the Nasdaq Composite slid 1.7%. Semiconductor shares bore the brunt of the pain. Nvidia, the world’s AI chip champion, declined 1.4%, while TSMC — which beat Q2 profit expectations but announced higher-than-expected capital expenditure — fell more than 3%. The Philadelphia SE Semiconductor Index has now tumbled roughly 17% in July alone, on track for its worst weekly loss since early April.
The selloff was not limited to the United States. SoftBank sank over 9% in Asia, while European chip stocks extended their losses. Further stoking investor jitters was the debut of a powerful new AI model from Chinese startup Moonshot AI, which analysts say narrowed the gap with leading U.S. offerings, adding fresh competitive pressure to already-stretched valuations.
Analysts attribute the broad retreat to a mix of profit-taking after a spectacular first-half rally — Micron soared over 200% year-to-date — and growing fears over whether hyperscalers’ trillion-dollar AI infrastructure bets will deliver commensurate returns. A hawkish Federal Reserve and escalating Iran war tensions added to the market’s unease.
Sources: Invezz | ABC News | Yahoo Finance / Reuters