Why are tech stocks tanking?
Katie Forster
Tue, July 28, 2026 at 12:07 PM GMT+5:30
3 min read
- 005930.KS
-13.39% - TSM
-1.07%
Investor jitters over how long the artificial intelligence spending boom will last and concern over Chinese competition in chipmaking sent technology shares plunging Tuesday
South Korea’s Samsung Electronics fell more than 12 percent and Japanese memory chipmaker Kioxia was down 18 percent, while Taiwanese giant TSMC slid 3.0 percent
The declines followed losses by major US semiconductor stocks, after a report said a company was making specialised ultraviolet etching machines to boost China’s chip industry
Here are the main factors behind the most recent tech rout:
Wall Street chip shares sank Monday after tech news outlet The Information reported that a Chinese state-backed company was making immersion deep ultraviolet (DUV) lithography machines
These systems can etch miniscule circuits onto silicon to create microchips that power AI as well as all sorts of everyday electronics
DUV is less advanced than so-called extreme ultraviolet (EUV) lithography, a technology mastered only by the Dutch firm ASML
The sale of ASML’s EUV machines to China is banned by US trade restrictions designed to keep American tech in the lead, but China is also reportedly in the early stages of producing its own EUV
“China’s domestic lithography advances bypass Western supply chains entirely, hitting equipment makers hardest,” Angela Harmantas at Proactive Investors wrote
Etching chips with DUV “is slower, lower-yield and more expensive than EUV production, but it is proving sufficient for near-frontier chips, unsettling policymakers and investors who had assumed China faced tighter constraints”
– Overheating concerns –
Harmantas said the declines “also reflect broader valuation concerns” in the technology sector
AI-related shares have skyrocketed recently, with SK hynix gaining more than 500 percent over the past 12 months, for example
But that has fuelled concerns over overheating, and questions over when the eye-watering amounts ploughed into developing AI and building new data centres will reap returns
“High expectations tied to AI infrastructure spending have left sector rallies vulnerable to profit-taking amid shifting macroeconomic conditions,” Harmantas said
Experts have warned that if the AI bubble pops, the fallout could be bigger than anything Wall Street has ever seen
Analysts also warn of circular financing — where big tech companies invest in AI startups, which then use that money to buy big tech’s own products and services
– Debt risks –
Around half a year ago, big tech companies were buying back their own shares — a move that signals excess cash and drives up their stock price.
