From Nvidia to Samsung: Why AI Stocks Are Falling Around the World

A wave of selling hit tech stocks globally this week as investors began questioning whether the massive spending on artificial intelligence is actually paying off.

The Nasdaq closed 2.2% lower on Tuesday. The S&P 500 dropped 1.43%. The Dow Jones held relatively steady.

The sell-off started Monday when Alphabet had its worst day on the markets in over a year, falling 5%. Two senior AI researchers had left the company the week before, unsettling investors.

SpaceX, which went public on June 12, dropped 16% Monday. The company then announced plans to raise $20 billion in bonds, raising questions about debt-fueled AI spending.

Chipmakers Take the Hardest Hit

Chipmaker stocks were among the worst performers on Tuesday. Micron Technology fell over 13%. Intel and Advanced Micro Devices each dropped around 6%.

Micron's drop came largely from nerves ahead of the company's earnings report due Wednesday. Investors are watching closely for signs that AI infrastructure spending is continuing.

Micron's stock had risen nearly 800% over the past year, driven by demand for memory chips used in AI systems. That kind of run-up makes any doubt about AI growth costly for shareholders.

Global Markets Feel the Pressure

The sell-off spread beyond the US. South Korea's benchmark index closed 10% lower on Tuesday. Samsung and SK Hynix, two of the world's largest chipmakers, each fell more than 12%.

Japan's Nikkei 225 closed down 3.5%. Markets across Asia reflected the same concern: that AI valuations may have run too far, too fast.

Morgan Stanley estimates AI-related borrowing will surpass $500 billion this year alone.

Is AI Worth the Money?

According to Stanford University's AI Index Report, global corporate investment in AI topped $580 billion in the past year. Over the four years before that, total spending exceeded $1 trillion.

Seven tech companies now make up 30% of the S&P 500's value. That concentration has some economists drawing comparisons to the dot-com bubble of the early 2000s.

The Federal Reserve also signaled last week it may raise interest rates to combat rising inflation. Higher borrowing costs add pressure to companies already spending heavily on AI infrastructure.

OpenAI and Anthropic are both preparing for what could be two of the largest IPOs in history. Both companies are now generating revenue, but long-term profitability remains an open question.

"The market is trying to kind of digest all this and saying, 'Are we going to start to see returns?'" said Mark Vena, CEO of SmartTech Research.

Analysts say Micron's Wednesday earnings report will be an early test of whether confidence in the AI investment cycle holds.