Semiconductor stocks faced significant selling pressure on Tuesday after Broadcom’s chief executive characterized a large portion of the current investment in artificial intelligence as a form of “casino” gambling. The market decline was compounded by news from China, where memory chip manufacturer CXMT announced notable advancements in its proprietary chip architecture.
The impact was most severe across Asian markets. South Korea’s Kospi index suffered a 6.25% drop as investors aggressively offloaded semiconductor holdings. Japan’s Nikkei index retreated by 1.8%, while the Taiwan exchange fell by nearly 2%, mirroring declines at local industry giant TSMC. Individual stock performance was stark: Samsung Electronics shares fell 7.4%, and SK Hynix saw a 10% decline. In Japan, Tokyo Electron shares dropped 7.15%, while SoftBank Group—a prominent investor in OpenAI—experienced an 8.5% slide.
Trading on Wall Street reflected this cautious sentiment. The tech-heavy Nasdaq dropped 0.35%, or more than 100 points, hitting 30,556 shortly after opening. Specific tech equities struggled, with Micron Technology down 4.8%, Advanced Micro Devices falling 1.4%, Nvidia slipping 0.8%, and Broadcom declining 0.2%. By contrast, the Dow Jones Industrial Average rose nearly 0.4%, and London’s FTSE 100 index reached a three-week high, climbing 0.73% to 10,762 behind stronger financial sector results and lower oil prices. Brent crude, the global oil benchmark, dropped 1.2% to $105.36 a barrel.
Broadcom CEO Hock Tan expressed significant skepticism regarding the current AI investment climate during a conference in Singapore. He argued that many market participants lack a fundamental understanding of their own bets, setting “extreme expectations” that mirror the atmosphere of a casino. Tan pointed out that even industry leaders like OpenAI, which reported $50 billion in annualized revenue by the end of September, remain unprofitable due to the massive capital requirements of model training.
Tan compared the current surge in corporate AI spending to childhood experiences at video arcades. He described enterprise revenue from pilot projects as transient, suggesting that businesses are burning through capital without necessarily establishing long-term, viable business models. He remarked that providing frontier generative AI models currently demonstrates potential revenue growth but offers no concrete guarantees of future profitability.
Market analysts are increasingly concerned that the volatility in the sector is tied to massive, debt-funded spending on AI infrastructure. Chris Beauchamp, chief market analyst at IG, noted that the downward trend for chip stocks is being exacerbated by competitive developments in China. CXMT’s recent progress on new DRAM architecture has heightened investor anxiety regarding the company’s potential to challenge established market leaders like Samsung, SK Hynix, and Micron. AI shares have been on a rollercoaster in recent months amid concerns that companies are spending eye-watering amounts on AI infrastructure, funded by debt. According to the latest sell-off came after CXMT, It had made good progress on new Dram architecture that would boost memory density, with plans for a product rollout.
CXMT, which debuted on the Shanghai stock market in late July, specializes in DRAM chips that are essential for powering the calculations behind AI systems. For investors, the emergence of a aggressive Chinese rival poses a threat to the margins of Western and regional incumbents. Beauchamp observed that while technological improvement may benefit end-users, it poses a significant risk to high-flying tech stocks that have become the primary drivers of recent market rallies. “While great for customers who can enjoy the white heat of technological improvement and get falling margins into the bargain, it is dangerous for high-flying tech stocks who have promised so much, and on whom the entire stock market rally seems to rest.”.
