Global stock markets had a rough week as investors tried to make sense of fast moving news from China's chip industry. The swings hit some of the biggest names in tech and semiconductors.
It started Monday when CXMT, a Chinese memory chipmaker, listed its shares on the Shanghai stock market. The stock soared 466% in value, giving the company a valuation of 3.3 trillion yuan, or about 365 billion pounds.
On the same day, reports surfaced that China had developed its own tools for deep ultraviolet lithography. This is the technique used to etch extremely thin lines onto silicon wafers, and until now only the Dutch company ASML could make the machines that do it.
Markets React Fast
The news sent chip stocks falling around the world. South Korea's Kospi index dropped 11.5% on Tuesday and another 6% on Wednesday.
The fall was driven by the index's two biggest companies, SK Hynix and Samsung Electronics. Both make memory chips and were seen as most exposed to new competition from China.
In the United States, the Nasdaq fell into correction territory on Thursday, dropping more than 10% from its recent high before recovering some ground. Nvidia lost more than 5% that day.
By Thursday evening, Apple had overtaken Nvidia as the world's largest listed company.
A Quick Turnaround
The mood shifted on Friday. Strong earnings from Amazon and Microsoft helped calm investors, and the Kospi jumped nearly 20% in a single day.
Even with the rebound, the index still posted its worst month since the global financial crisis in October 2008.
Analysts said some of the panic may have been overdone. CXMT makes Dram memory chips, which store data, not the graphics processing units that power AI systems. That means it does not directly compete with Nvidia.
Alvin Nguyen, an analyst at Forrester, called the sell-off in memory chip stocks an overreaction. He pointed out that global memory chip shortages are expected to last until 2030, so demand should stay high regardless of new competitors.
The lithography news is seen as a bigger long term question. If China can now build these machines itself, it could eventually produce chips that rival Nvidia's.
Mark Boost, chief executive of the cloud company Civo, said building a few machines is a symbolic win but not an overnight replacement for ASML. He added that fabrication plants depend on efficiency and yield built over years, not just having the equipment.
Chris Beauchamp of IG said Chinese chipmakers could eventually undercut western rivals on price, the way Chinese firms have done in other industries like steel and cars.
Nvidia's troubles were not only about China. The Wall Street Journal reported that Nvidia is considering a 250 billion dollar backstop for a data center project tied to OpenAI. That news added to investor unease during the same week.
Nvidia shares have started to climb back up since the drop, though they remain below where they were before the sell-off began.
