Nikkei, KOSPI tumble as Nvidia’s $750B AI deals stoke fears

Japanese and South Korean equities slid on Tuesday, July 28, as a deepening selloff in semiconductor stocks rippled across Asian markets. Japan's Nikkei 225 fell 3.37%, while South Korea's Kospi sank sharply, with heavyweight chipmakers dragging both indexes lower after Nvidia ↘ 4.99% dropped nearly 5% in New York on Monday.tradingeconomics+2

Nvidia's Deals Fuel Circular Financing Fears

The catalyst for the latest wave of selling was a Bloomberg report detailing more than $750 billion in AI deals that Nvidia is pursuing, including a $500 billion-plus partnership with SK Group and discussions to guarantee as much as $250 billion in computing leases for OpenAI. Investors worry that Nvidia is increasingly financing the same customers buying its chips, a pattern critics call circular financing that could artificially inflate demand and valuations across the AI supply chain.247wallst+3

Nvidia's Monday selloff — which saw Apple ↗ 1.17% overtake it as the world's most valuable public company — cascaded into Asian trading hours, hitting memory chipmakers especially hard. Samsung Electronics fell more than 7% and SK Hynix dropped over 9% in early Seoul trading, extending a punishing stretch for the two companies that together dominate the Kospi's weighting.investing+2

Asia Bears the Brunt

The rout reflects a broader pattern that has gripped Asian markets throughout July. The Kospi has now fallen roughly 30% from its June record close, having triggered multiple circuit breakers this month alone. The Nikkei, weighed down by chip-equipment names such as Tokyo Electron and Advantest, briefly traded near its lowest level in more than a month.japantimes+3

Analysts point to a combination of forces behind the prolonged unwind: stretched valuations after a first-half AI rally, leveraged ETF products amplifying moves in Korean chipmakers, and hedge funds unwinding their exposure to the sector, which Goldman Sachs ↘ 1.23% noted had reached the lowest level of the year.suncrypto+1

Earnings Week Looms Large

The selloff comes at a pivotal moment, with Microsoft ↗ 1.94%, Apple, Amazon Amazon.com, Inc. ↘ 0.31%, and Meta Platforms ↘ 0.22% all scheduled to report earnings this week. Investors are watching closely for signals on AI capital spending plans, which have become the key driver of sentiment for semiconductor stocks globally. The Federal Reserve also begins a two-day policy meeting on Tuesday, adding another layer of uncertainty.facebook+2

Whether this week's earnings can steady the market or deepen the correction may hinge on a single question: are the hundreds of billions flowing into AI infrastructure producing returns that justify the spending — or merely recycling capital through an increasingly interconnected web of deals?