Semiconductor stocks slide as Broadcom CEO warns of AI speculation

Semiconductor stocks experienced a significant downturn, with SK Hynix falling up to 11%, Samsung by 9%, ASML by 4.2%, Infineon by 2.1%, and Micron by 3.1%. The decline was driven by a shift in market narrative from supply constraints to a potential capital crunch, exacerbated by reports that Chinese memory chipmaker CXMT has made progress in DRAM architecture, though it lacks proof of serial production. Hock Tan, CEO of Broadcom, amplified the sentiment by comparing AI investors to gamblers, stating that many do not know what they are investing in. This commentary aligns with a Bank of America survey identifying long global semiconductors as the most crowded trade, with 45% of professionals expecting an AI bubble to burst by 2027. The Wall Street Journal noted that single-stock options trading is at its highest level since the 2021 meme stock hype. Elon Musk also commented on the situation, observing that China is extremely effective at scaling production once development is solved, a dynamic he previously noted in the electric vehicle sector. While valuations remain low, with SK Hynix and Samsung trading at 4x 2027 earnings and Micron at 6x, the market is reacting to the risk that Chinese scaling capabilities will disrupt memory chip supply chains and pricing dynamics. The S&P 500 has not fallen 1% or more in 53 trading days, a streak last seen in January 2020, suggesting broader market complacency despite sector-specific volatility.