Chip Stock Selloff Deepens as AI Rally Faces Rate, Competition Fears

US markets opened mixed on Tuesday as a selloff in chip stocks intensified for a second day, dragging the Nasdaq down 0.4% while the Dow Jones rose 0.6% to 52,092 points. The Philadelphia Semiconductor Index (SOX) headed for a sixth straight decline, falling 2.7%, with Micron Technology dropping 5%.

The rout spread across Asia, where South Korea's KOSPI tumbled over 6% for a fifth consecutive session and Japan's Kioxia plunged 13%. Triggering the decline were media reports that Chinese firm CXMT plans to launch a new generation of datacenter memory chips, narrowing the technology gap with Western rivals.

“The technological competition from the Middle Kingdom fuels the worry of how long the high valuations and profit margins of established chip giants can still be justified.”

Analysts warn that rising interest rates and bond yields — the 10-year US Treasury yield fell six basis points to 5.18% as investors fled to safety — threaten to undermine the massive capital expenditure driving the AI infrastructure boom. An Australian data center IPO failed last week, and credit investors are growing more selective toward AI-sector debt.

Brent crude oil prices fell 1.7% in early trading, easing after three straight gains amid Middle East tensions. Goldman Sachs shares bucked the trend, trading higher as major banks kicked off earnings season.