Overview
Asian equity markets saw sharp losses as investor optimism around chipmakers and AI-related spending shifted to concern. Chip stocks were particularly hard hit on Tuesday after a series of reports heightened worries about competitive pressure from China and the structure and durability of financing for the AI infrastructure boom.
Market moves
South Korea's KOSPI plunged nearly 10% and activated a circuit breaker, while Japan's Nikkei retreated 4.4%. Both markets had been among the strongest performers year-to-date, but the recent sell-off has pushed them down to multi-month lows.
Nvidia and AI financing questions
Nvidia fell 5% on Monday after a Wall Street Journal piece said the chipmaker has held talks about providing roughly $250 billion in financing guarantees for an OpenAI data centre. The report said the guarantee would not extend to Nvidia chips inside that centre. It also said discussions included arrangements to finance OpenAI chip purchases worth up to $350 billion, a detail that brought attention to the increasingly circular nature of spending tied to AI build-out.
China, lithography and equipment suppliers
Europe's leading chip-equipment maker was also affected: ASML declined 8.5% after The Information reported that China has begun producing domestically developed immersion deep ultraviolet lithography machines. That technology has been a critical part of advanced chipmaking and has long been dominated by the Dutch firm. The combination of that development and the high-profile market debut of CXMT Corp has prompted investor concern that China's semiconductor sector may be moving from catch-up to genuine competitive contention.
On Monday CXMT surged to become the largest company by valuation on China's stock market, intensifying discussions about how market share and AI-related revenue might be distributed among dominant suppliers.
Reuters reported last week that Apple had sought U.S. assurances that CXMT would not be added to a trade blacklist.
Hyperscaler spending and upcoming earnings
Investor focus is also on upcoming earnings from major technology and hyperscale companies. Reports from Apple, Meta, Microsoft and Amazon later this week are expected to provide additional detail on hyperscaler spending plans for AI infrastructure.
Commodities, bonds and rates
Tumbling oil prices failed to provide meaningful relief for equities, and bonds held steady through Tuesday's Asia session even as crude futures extended losses. Markets are pricing in roughly a 38% chance of a U.S. rate hike this week, adding another layer of uncertainty to investor decision-making.
Key developments to watch
- Economics: France consumer confidence, U.S. consumer confidence
- Earnings: Mercedes-Benz, Barclays, Man Group, EssilorLuxottica, Logitech, Rio Tinto, Kering, Ford, Mondelez, Visa, NXP, Seagate, Coca-cola, UPS, Boeing
Conclusion
The combination of reports around Nvidia's financing discussions, the emergence of China-made immersion DUV lithography, and a blockbuster listing in China has shifted investor sentiment, producing notable volatility in chip and related stocks. With major tech earnings and key economic data due, markets will be watching for clearer signals about hyperscaler demand, competitive dynamics in semiconductors, and the path for interest rates.