Fitch warns AI boom poses major credit risk as chip stocks slide worldwide

Technology shares fell sharply across global markets on Tuesday as a deepening selloff in semiconductor stocks intensified doubts over whether massive spending on artificial intelligence infrastructure will deliver adequate returns.

Chipmakers Lead the Rout

Asian semiconductor stocks tumbled on July 28, with South Korea leading the regional decline, as investors questioned lofty valuations built on AI spending expectations, according to Reuters. Samsung and SK Hynix slid amid concerns about China's advances in chipmaking and AI, which fueled worries of stronger competition. The selloff spread into Europe, with tech and semiconductor shares dropping as doubts grew over the profitability of record AI capital expenditure.straitstimes+2

In the United States, futures on the tech-heavy Nasdaq 100 dropped ahead of the open, while S&P 500 futures also declined, according to Bloomberg. The rout extended a weeks-long slide that has seen semiconductor shares post steep losses throughout July.bloomberg+1

Fitch Sounds the Alarm

Ratings agency Fitch added to the anxiety on Tuesday, warning in its third-quarter Global Risk Outlook that the AI boom and the risk of a market correction are emerging as major global credit threats. "The scale of AI investment is such that the exposure of the economy and overall capital market to such a correction is significant," Fitch said.finance.yahoo+1

The agency noted that the S&P 500's cyclically adjusted price-to-earnings ratio has climbed to levels close to those seen during the late-1990s dotcom boom, while U.S. corporate bond issuance surged 26% in the first half of 2026, driven largely by AI-related fundraising. Capital expenditure by Alphabet ↘ 3.58%, Amazon Amazon.com, Inc. ↘ 2.24%, Meta ↗ 1.02%, and Microsoft ↗ 0.52% is projected to jump more than 75% this year to $700 billion, Fitch said.wtvbam

Uncertainty over future AI revenues, regulation, competition, and labor-market disruption could trigger a prolonged market correction with "widespread macroeconomic implications," the report warned.wtvbam

Indian IT Bucks the Trend

While hardware-exposed tech names suffered, Indian software services firms moved in the opposite direction. The Nifty IT index closed up 3.32% on Tuesday, led by gains in Coforge, Tata Consultancy Services, and Tech Mahindra. The rally reflected the relative insulation of India's outsourcing-focused IT sector from the AI hardware capital spending cycle that has rattled chipmakers worldwide.business-standard