Chip stocks sink as SK Hynix’s record earnings fail to impress AI investors

Semiconductor stocks fell sharply on Wednesday after SK Hynix ↘ 3.12% reported second-quarter results that, despite setting records, failed to meet the lofty expectations of investors increasingly uneasy about the sustainability of the artificial intelligence spending boom. The selloff extended a brutal stretch for chip stocks that has erased hundreds of billions of dollars in market value this month.

Record Profits, Rising Doubts

SK Hynix posted quarterly revenue of 79.3 trillion won with operating profit surging 557% from a year earlier, marking an all-time high for the South Korean memory maker. But the results fell short of elevated analyst forecasts, reflecting what the company described as a less favorable product mix rather than weakening AI demand. Management reiterated that demand is expected to outpace supply through 2030 and announced plans to boost 2026 capital spending by roughly 50% to at least $31 billion to ramp up AI memory production.finance.yahoo+2

The PHLX Semiconductor Index ↘ 1.19% dropped more than 2%, with Nvidia ↘ 1.47% falling over 1% and AMD Advanced Micro Devices, Inc. ↘ 1.47% declining roughly 5.5%, breaking below the $450 support level. Memory makers Micron ↘ 2.22% and SanDisk Western Digital Corporation ↗ 1.96% also fell, while Barclays ↘ 2.72% analysts cut their price target on SK Hynix's U.S.-listed shares to $300 from $330.marketbeat+1

AMD's Big Deal Overshadowed

The selloff overwhelmed what would otherwise have been a headline-making announcement for AMD. The chipmaker signed a 15-year infrastructure deal with Core Scientific ↘ 3.67% for more than 500 megawatts of U.S. data-center capacity, with the potential to expand to 2.5 gigawatts, according to Reuters. The initial agreements could generate more than $14 billion in base contracted revenue for Core Scientific, with AMD deploying its Instinct GPUs and EPYC processors across five sites beginning in 2027. Investors largely shrugged off the deal, focusing instead on broader concerns about whether enormous AI infrastructure commitments will translate into adequate returns.finance.yahoo+3

Wider Unwind Accelerates

The weakness came amid a deeper reassessment of the AI trade. In Asia, the Kospi plunged on Tuesday after SK Hynix's U.S.-listed shares fell below their recent IPO price, triggering a circuit breaker on the Korean exchange. A strong debut from Chinese memory maker ChangXin Memory Technologies on the Shanghai exchange also reignited fears about expanding supply from China. A UBS basket of AI-spending stocks is now trailing a basket of AI-disruption stocks by a record 42 percentage points, according to Bloomberg.bloomberg+3

The Federal Reserve held interest rates steady on Wednesday, voting 9-3 to keep its benchmark rate in the 3.5% to 3.75% range. SK Hynix's U.S.-listed shares pared losses after the decision. Investors are now looking ahead to earnings from Microsoft ↗ 0.52%, Amazon Amazon.com, Inc. ↘ 2.24%, and Meta ↗ 1.02%, all expected to announce further increases in AI-related spending. AMD is set to report its own results on August 4.finance.yahoo+3