KEY POINTS
- A global chip sell-off dragged the US Nasdaq down 2.21% overnight, with the rout starting in South Korea, where memory giants Samsung and SK Hynix each fell more than 12%.
- Micron tumbled about 13% to US$1,051.77, and Nvidia lost around 4%, as investors began to ask whether the AI boom has run too far.
- We believe this looks more like a sharp reset after a huge rally than proof that the AI story is broken, though the risks are clearly rising.
- Micron’s results, due after the next US close (early Thursday AEST), are the next big test for the entire AI trade.
Is the AI bubble bursting? Not yet, in our view, but the market is clearly rattled. Overnight, a wave of selling hit AI and chip stocks around the world. The US Nasdaq fell 2.21%, and the S&P 500 dropped 1.44%, led lower by the semiconductor names that have powered markets for the past year.
What Triggered the Sell-Off?
The trouble started in Asia. South Korea’s share market crashed almost 10%, its steepest fall since March, after a report that chipmaker SK Hynix may slow its expansion of advanced AI memory and shift towards more ordinary chips. Memory giants Samsung and SK Hynix each fell more than 12%, and the selling quickly spread to Europe and Wall Street.
A second worry was interest rates. Bank of America now expects three US rate rises in 2026, and markets have given up on cuts entirely. This matters because higher rates hurt fast-growing tech stocks the most. Investors simply pay less today for profits that may not arrive for years.
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Is the AI Bubble Bursting or Just a Healthy Reset?
Here is the honest answer: it could be either, and the truth is probably somewhere in between.
The bear case is simple. Micron has more than tripled in value this year, and a run like that leaves very little room for disappointment. The bull case is that demand for AI memory and data centres is still strong, and analysts note the selling looked more like a rush for the exits than a real change in the companies’ earnings.
We lean towards this being a crowded trade getting stress-tested, not the end of the AI story. But if the selling spreads well beyond chip stocks, that view will need to change quickly.
Which Stocks Were Hit Hardest?
The damage was widespread. Micron (NASDAQ:MU) fell about 13% to US$1,051.77, down from a previous close of US$1,211.38. Nvidia lost around 4%, while the biggest hits came in South Korea, where Samsung and SK Hynix each dropped more than 12%. The common thread was profit-taking after enormous gains.
What Does It Mean for ASX Investors?
When US tech sneezes, ASX tech catches a cold. The broad ASX 200 held up far better than US tech, closing up 0.24%, but local high-growth names like Xero (ASX:XRO), WiseTech (ASX:WTC) and NEXTDC ( ASX:NXT) are the most exposed when global AI sentiment sours. Add Australia’s own sticky inflation and the chance of higher-for-longer rates, and the pressure builds. For investors, the key is separating good companies caught in a sector sell-off from those with real problems.
So, is the AI bubble bursting? We do not think so, at least not yet. This looks more like a reset after a massive run, and Micron’s result early Thursday will tell us a great deal about what comes next.
