Chip stocks are slumping from their record highs as investors appear to be hitting pause on the AI run-up. The tech-focused Nasdaq 100 index slid 3.3% Tuesday, while the broader S&P 500 closed 1.4% lower. A selloff in South Korea sparked jitters among traders, triggering a broader unwind.
The pullback marks a reality-check moment for the AI buildout — both for businesses pouring budgets into compute and for investors who bid up stock prices of any company tied to the technology. Demand for AI technology is still growing, but the cost of some compute is declining, while flagship frontier models from OpenAI and Anthropic remain far more costly to run.
Most chip companies critical to AI processing have seen triple-digit stock growth over the past year. Micron Technology, which has experienced vertical growth, fell 13.2% in the selloff. Investors appear to be unwinding some of that momentum, getting jittery about the surge that lifted valuations to extreme levels.
The selloff raises questions about whether AI-related stocks have become overheated. If the pullback broadens, it could pressure capital flows into AI infrastructure and dampen risk appetite across tech sectors. The speed of AI development continues to accelerate, but market pricing may be recalibrating to longer-term realities.
Some analysts argue that the selloff is a healthy correction rather than a structural shift, given that AI adoption and spending remain on an upward trajectory.