The fragile AI trade
SMH•AI stocks sold off as signs of rapid Chinese tech progress raised concerns about sector profitability, with South Korea’s KOSPI sinking more than 7% and US chipmakers falling 2.7%. Brent crude hovered near $106 a barrel as Middle East conflict kept inflation worries alive.
1. AI trade faces doubts
A steep rout in AI stocks cast a shadow over markets as investors questioned how durable and profitable the sector will be. The selloff followed reports of rapid progress by Chinese rival ChangXin Memory Technologies, raising the prospect that Chinese firms are closing the technology gap. The US chipmakers index fell 2.7%, while South Korea’s tech-heavy KOSPI sank more than 7% to its lowest level since late July.
2. Oil and earnings in focus
Investors remain concerned about concentration risks and how quickly heavy spending on AI infrastructure can generate returns. The widening Middle East conflict has kept Brent crude near $106 a barrel, sustaining inflation worries and bond yields near multi-decade highs, although Treasuries drew some safe-haven demand on Tuesday. Four of the six largest US lenders—JPMorgan Chase, Goldman Sachs, Citigroup and Wells Fargo—were due to report results later in the day.
