Global tech stocks are tumbling due to surging infrastructure costs, fears of "circular" financing loops, and rising hardware competition from China. Major factors include Nvidia's massive financial backstops for data centers, local Chinese breakthroughs in chip-making tools, and low-cost open-source models undercutting U.S. dominance.
Market Sell-Off and Financing Worries
• Nvidia's Backstop: Reports that Nvidia may provide roughly $250 billion toward an OpenAI data-center project stoked fears that tech giants are financing their own customers.
• Circular Debt: Growing unease over hundreds of billions in interconnected debt, with credit-default swaps for major tech firms hitting record highs.
• Asian Market Rout: South Korea's KOSPI index plunged 10.8%, triggering multiple circuit breakers, led by heavy drops in memory giants SK Hynix and Samsung.
China's Chip and Model Competitiveness
• Lithography Breakthrough: Reports that Chinese state-backed entities have begun mass-producing domestic deep ultraviolet (DUV) lithography equipment, bypassing U.S. trade restrictions, supported by EU bonzas, and the Dutch. This was the only claim to fame for EU participation in AI development. This is gone now. Will China improve this technology further? Of course.
• Low-Cost Models: Announcements like Moonshot AI’s Kimi K3 and other low-cost models show high performance at a fraction of U.S. training costs, challenging the necessity of high-priced American compute.
• Domestic Giants: High-profile market debuts and funding surges for Chinese firms like memory chipmaker CXMT challenge Western market valuations.
“South Korea temporarily paused trading on Tuesday as its benchmark stock index led losses across the region, closing more than 10 percent lower.
Technology stocks tumbled on Tuesday, dragged down by fears of the hefty bills for the build-out of artificial intelligence systems and concerns over intensifying competition from China in memory chips — a critical component of A.I. long dominated by South Korea and its peers.
South Korea’s benchmark Kospi index plunged more than 10 percent on Tuesday, at one point triggering a temporary trading halt. Benchmark indexes in Japan and Taiwan both fell around 4 percent. Stocks in China fell over 2 percent.
Futures for the tech-heavy Nasdaq fell about 1 percent. The American chip company Micron was down 6 percent in premarket trading. Nvidia, the leading chip maker, was also lower, as was SpaceX, Elon Musk’s rocket and A.I. company. In Europe, the German chipmaker Infineon fell 4 percent and the Dutch semiconductor equipment maker ASML shed 3 percent.
The latest A.I.-related market tremor began on Monday, when the shares of China’s leading memory chipmaker, ChangXin Memory Technologies, began trading after a blockbuster initial public offering. The company’s stock soared nearly 500 percent on its market debut, quickly making it the most valuable company on the Shanghai exchange.
It slipped 4 percent on Tuesday.
The listing prompted widespread fears that intensifying industry competition could threaten rival global memory chipmakers in South Korea, Japan, Taiwan and the United States.
The declines in Asia began as soon as stocks started trading on Tuesday, with A.I. and semiconductor stocks the hardest hit. Japanese flash memory maker Kioxia fell more than 18 percent. South Korean semiconductor company Samsung Electronics dropped about 13 percent.
Asian markets have been trending downward since late June, weighed down by recurring concerns over the sustainability of this year’s A.I. rally.
The staggering scale of spending required to keep up in the global A.I. race was highlighted this week by OpenAI, the parent of ChatGPT, nearing a deal to lease a $500 billion data center in Ohio, supported by $250 billion in financial backing from Nvidia. Last week, earnings reports by Tesla and Alphabet, Google’s parent company, shook the markets as they revealed their own enormous A.I. spending needs.
On Monday, the Chinese start-up Moonshot publicly released the details of its latest A.I. model, adding to investor concerns about an A.I. arms race between China and the United States.
The latest market turmoil is an unwelcome turn for a region where the A.I. boom has served as a rare economic bright spot. In markets like South Korea and Taiwan, rising chip exports and soaring A.I. valuations have masked broader weakness across their domestic economies, which remain heavily dependent on energy imports from the Middle East.
The war in Iran, another major worry for investors, has rattled markets recently by restricting oil exports from the Persian Gulf and Red Sea, pushing up oil and gas prices.
But President Trump said on Monday that there was “a good chance” that a new round of diplomatic talks could yield a breakthrough in the monthslong war.
A recent pause in fighting has helped ease oil prices, with Brent crude, the international benchmark, falling to around $84 a barrel on Tuesday. Still, the cost of crude is up more than 15 percent since the start of the war, feeding into higher prices for gasoline and a wide range of products derived from petroleum.
And anxiety about the prospects for tech stocks will be tested again soon, with Microsoft and Meta scheduled to report earnings Wednesday, alongside South Korea semiconductor giant SK Hynix. On Thursday, Apple and Amazon report earnings, as does Samsung Electronics.” [1]
1. Tech Stocks Tumble on Worries About A.I. Spending and China’s Chip Competition. River Akira Davis. New York Times (Online) New York Times Company. Jul 28, 2026.
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