AI Worries Send Asia’s Chip Stocks Tumbling

Asian equity markets fell sharply on Tuesday, led by South Korea and Japan. The KOSPI plunged more than nine percent to its lowest level since mid-April, triggering volatility interruptions in early trading. Japan’s Nikkei 225 lost as much as four percent, while the broader TOPIX shed around three percent. Memory makers and equipment suppliers were hit hardest: SK Hynix dropped by up to 13 percent, Samsung Electronics by up to ten percent. In Japan, Kioxia fell as much as 18 percent, while Tokyo Electron, Disco, Nikon and Murata each lost more than nine percent.

Two triggers: Nvidia’s deal volume and a report out of China

The sell-off began with reports about the sheer scale of Nvidia’s latest financing commitments. The company is working on a fresh round of AI deals worth more than $750 billion; a partnership with South Korea’s SK Group is set to involve more than $500 billion in business between the two, and talks are underway on a backstop of up to $250 billion that would help OpenAI lease computing capacity from a US data center project. Critics see a pattern of circular financing: Nvidia capital flows to customers who then buy Nvidia chips. CEO Jensen Huang rejects that reading, arguing that the company’s investments account for only a small share of the money its customers ultimately need to raise. Nvidia shares fell as much as 5.3 percent to $195.92 in New York on Monday, while the annual cost of insuring its debt against default rose to roughly 0.82 percentage points.

Pressure intensified after a report by The Information that a Chinese state-backed company has begun mass-producing deep ultraviolet (DUV) immersion lithography systems — a scenario that would put Japanese equipment makers and European market leader ASML under competitive pressure over the medium term.

Chinese and Hong Kong tech stocks held up comparatively well: the Hang Seng gained 0.3 percent, while the Shanghai Composite and CSI 300 fell 0.6 and 1.2 percent respectively. Support came from memory maker CXMT’s strong trading debut in Shanghai, which fueled optimism about Beijing’s push for semiconductor self-sufficiency.

This week: four quarterly reports in 48 hours

The timing is awkward. Microsoft and Meta report after the US close on Wednesday, July 29, with Apple and Amazon following on Thursday, July 30. At Microsoft, attention centers on Azure growth and whether AI investment is translating into revenue: the company has guided to capital expenditure of around $190 billion for calendar 2026, and its commercial remaining performance obligations (RPO) rose 25 percent to $627 billion. The stock is down roughly 18 percent year-to-date. Meta had guided to second-quarter revenue of $58 to $61 billion, Amazon to $194 to $199 billion with operating income of $20 to $24 billion.

Apple is the outlier in this round: it has no meaningful hyperscaler footprint and no comparable data center build-out to finance. The focus there will be on iPhone sales, services growth, the China business and progress on commercializing Apple Intelligence.

The build-out is increasingly running on debt

What makes the Asian sell-off relevant for the US companies is the changed financing structure. According to a FactSet analysis, Alphabet, Amazon, Meta, Microsoft and Oracle are set to invest more than $690 billion in fiscal 2026 — close to $800 billion for the calendar year once leasing and prepayments are included. The share of those investments funded by new debt has risen from nine to 32 percent since 2024, and the five companies’ combined debt now stands at roughly $700 billion. Alphabet raised $84.75 billion through a share offering in June. Moody’s puts combined capex for the six largest hyperscalers — adding CoreWeave — at $785 billion this year, and has warned that the industry-wide investment wave is straining the tech groups’ finances.

The bond market tells the same story: Amazon has already raised around $54 billion in the US and Europe this year plus $10 billion in Canada, with a further $25 billion most recently; its capex budget stands at $200 billion, up from $131 billion in 2025. Meta tapped investment-grade markets for $25 billion this year, following a $30 billion deal in October 2025. Bloomberg also reported that demand for Amazon’s latest offering was unusually muted — a possible sign that capital markets are taking a more critical view of the sector’s growing funding needs. Bonds issued by the five companies yield roughly 0.25 percentage points more on average than those of comparably rated US corporates.

On top of that come obligations held off balance sheet: according to an analysis by Nikkei Asia, “shadow debt” structured through special-purpose vehicles amounts to around $1.65 trillion across the five companies, in addition to just under $1.35 trillion in officially reported debt.

Not every indicator points down

The demand side argues against the downturn thesis. TSMC reported second-quarter revenue of $40.2 billion, up 36 percent, and raised its full-year guidance to growth slightly above 40 percent. Credit analysts continue to classify the hyperscalers as high-quality borrowers, and no wave of downgrades is expected.

The decisive question may be less the size of the investments than when they pay off. Investors are increasingly focused on when the spending will show up in revenue and profit. Alongside the four earnings reports, this week also brings rate decisions from the Fed, the Bank of Japan and the Bank of England.