Wall Street's artificial intelligence chip stocks faced fresh selling pressure on Wednesday, with pre-market trading indicating continued weakness across the semiconductor space. US President Donald Trump said the ceasefire with Iran is "over" and described Tehran as "dirty players" while speaking at the NATO summit in Ankara. According to Business Standard, Trump said the US strikes overnight were retaliation for Iranian rocket attacks on commercial vessels, adding, "Iran shot rockets at ships, that's why US hit back." The escalating geopolitical tensions have dampened broader market sentiment and added to existing sector-specific concerns about AI chip valuations and competition. The latest decline follows Tuesday's broad-based selloff in semiconductor stocks after reports suggested Chinese AI startup DeepSeek is developing its own AI inference chips, potentially reducing its dependence on Nvidia's processors.
Major AI chip stocks experienced a dramatic selloff on Tuesday, with Intel, Nvidia, AMD, Micron, and SanDisk plunging up to 14% following reports that Chinese rival DeepSeek is manufacturing its own AI chips. According to latest market data, Micron and AMD fell as low as 9% to $891.66 and $504.10 respectively, while SanDisk plummeted 14% to $1,485.02. Intel plunged 11% to a low of $108.36 and Nvidia fell over 2% to trade at $191.14. The selloff represents a significant reversal from the previous session's strong rally, as investors grew increasingly wary of whether the AI boom would be able to justify the massive capital expenditure allocated to data center buildouts. Reuters reported that DeepSeek is developing its own AI chip, a move that could reduce its dependence on Nvidia and Huawei chips, adding to existing concerns about the sector's overbought conditions. While the project is still at an early stage, the report added to worries that the AI hardware market may become more fragmented over time. Reuters reports that DeepSeek has been working on the project for about a year, with the focus on designing an inference chip - a processor used to run AI models after they have been trained. The news agency also reported that three people familiar with the matter have reported that DeepSeek has been quietly assembling a chip-design team and collaborating with external semiconductor partners to advance the project.
Memory stocks came under particularly intense pressure as investors questioned whether the strong run in AI-linked hardware stocks has already priced in much of the good news. SanDisk shares fell over 10% on Tuesday as part of a broader selloff in semiconductor stocks, with Micron Technology dropping more than 7% and Marvell Technology declining 4.5%. Western Digital and Seagate also came under pressure as the market concern focused on whether prices and earnings are near a cyclical high. SanDisk has been one of the biggest winners of the memory rally, with the stock surging heavily over the past year helped by expectations that demand for storage and memory products will rise as AI data centres expand. However, Barron's reported that SanDisk had already dropped 23% in early July before the latest fall, as some of the year's strongest tech stocks started cooling off. The latest selloff also came after Samsung Electronics fell 6.9% in Seoul despite forecasting a 19-fold jump in second-quarter operating profit, showing that even strong earnings may not be enough when expectations are already high.
Wednesday's pre-market trading indicated that AI chip stocks would continue their downward trajectory, with significant declines across major players. Intel Corp. was down 4.57% in pre-market trading at $105.34 after ending Tuesday's session 9.66% lower at $110.39. Micron Technology Inc. slipped another 4.13% to $899.60 in pre-market after tumbling 4.71% in the previous session. Advanced Micro Devices Inc. fell 2.35% to $504.00 before the opening bell, extending Tuesday's 6.51% decline, while Nvidia Corp. traded 1.68% lower at $193.63 in pre-market after managing to close Tuesday marginally higher by 0.71%. The weakness comes as investors continue to reassess lofty AI-related valuations while turning increasingly risk-averse following fresh geopolitical developments involving Iran, which weighed on sentiment across global equity markets. The latest decline also follows Tuesday's broad-based selloff in semiconductor stocks after reports suggested Chinese AI startup DeepSeek is developing its own AI inference chips, potentially reducing its dependence on Nvidia's processors and intensifying competition in the AI hardware space.
The roller-coaster ride for AI stocks snapped back down on Tuesday and dragged Wall Street lower, with global stocks retreating significantly. Japan's Nikkei 225 fell 2.1%, and Germany's DAX lost 1.4% for two of the world's bigger moves. Stocks also felt pressure from a rise in oil prices after the British military said three tankers were struck by projectiles in the Strait of Hormuz, as the United States revoked a license that had authorized the sale of Iranian oil. AI stocks have been under similar pressure in recent weeks on worries that their prices shot too high and that AI may not produce enough productivity and profits to make all the investments in chips and data centers worth it. The development of DeepSeek's AI chip represents a significant strategic shift in the global AI landscape, particularly for Chinese companies facing US export restrictions. For Chinese companies, the push has become even more urgent following US export restrictions that have limited access to Nvidia's most advanced AI processors. The move comes at a time when AI companies around the world are increasingly looking to build custom chips instead of relying entirely on suppliers such as Nvidia. Owning both the software and the hardware can help companies improve performance, lower computing costs, and reduce dependence on third-party chipmakers. The initiative reflects that DeepSeek's broader ambition is to gain greater control over the technology powering its AI products, marking a strategic shift toward vertically integrated AI development.
