The AI trade is splitting in two. Chip stocks are suffering one of their worst months on record while Nvidia simultaneously negotiates to backstop $250 billion in data center loans for OpenAI — and Apple, the mega-cap that sat out the AI spending race, has become only the second company ever to touch a $5 trillion valuation1,7. ANALYSIS The juxtaposition captures a market that is not abandoning AI so much as violently repricing who benefits from it and who bears the risk.
Why it matters
The Philadelphia semiconductor index is down more than 22% this month, its sixth worst month ever8. Yet the underlying demand signals remain extraordinary: SK Hynix just posted operating profit that soared nearly 557% year on year and revenue that jumped 257%6. ◆ A sector where record profits trigger double-digit share declines is a sector where expectations, not fundamentals, are doing the repricing.
The big picture
Three distinct forces are converging. First, the sheer scale of AI capital commitments is testing investor confidence. Nvidia is working on a fresh round of AI infrastructure deals potentially worth more than $750 billion4. OpenAI is negotiating with Nvidia to guarantee about $250 billion in data center loans3. The deal is specifically for a 10-gigawatt site in Ohio. The deal involves government land — a former uranium enrichment site owned by the Department of Energy — and energy funding tied to U.S.-Japan trade negotiations. Anthropic and Microsoft have been among those bidding on the same Ohio site.
Second, the circularity question has moved from analyst chatter to front-page debate. As Bloomberg Technology anchor Ed Ludlow put it, describing the Nvidia-OpenAI structure: "Nvidia's both guaranteeing and backstopping, but also providing financing for AI data centers that at the end of the day, they do use Nvidia's technology and that is by definition circular". Ludlow noted that when he asked Jensen Huang to explain the SK Hynix deal number, Huang described it as representing what Nvidia would buy from SK Hynix in memory chips, what SK as a conglomerate would spend on its own AI infrastructure, "and then everything in between that we co-invest in. And there's like no real explanation of, okay, so you're giving them dollars or are they giving you dollars".
Third, the sell-off is cascading across Asia. SK Hynix slid more than 10% in South Korea despite its record results5. Samsung Electronics lost over 4%, LG Innotek fell 9%, and Seoul Semiconductor dropped over 6%. In Japan, Kioxia was down 10%, Tokyo Electron fell 8.5%, and SoftBank lost more than 7%. Kieron Poon, investment director of Asian equities at Aberdeen Investments, attributed the weakness to "the ongoing deleveraging process in Korea and softer sentiment towards global technology stocks," while adding that the volatility "has not changed our long-term positive view".
Meanwhile, Apple shares have jumped 25% this year. The company kept its capex spending low and is using cloud infrastructure and AI technology from Google, while the hyperscalers — Alphabet, Amazon, Meta, and Microsoft — collectively pour hundreds of billions into AI capital expenditures.
Between the lines
Apple on Tuesday briefly hit a market capitalization of $5 trillion, a day after passing Nvidia to become the most valuable publicly traded company. ANALYSIS The market is drawing a sharp line between companies that consume AI capital and companies that deploy AI as a feature — a rotation that rewards capital discipline over capital intensity. The circularity concern is not abstract: when Nvidia backstops loans that fund purchases of Nvidia hardware, the revenue cycle becomes self-referential in a way that traditional credit analysis struggles to underwrite.
Dan Niles, portfolio manager at Niles Investment Management, described the current decline in chip stocks as a "speed bump" in an uptrend, noting that in the 1990s, semiconductors saw drawdowns of about 50% before the index ultimately finished up 850% from end-1994 to its peak. ◆ The dot-com parallel cuts both ways: the SOX also lost nearly 80% over two-and-a-half years after the bubble burst.
SK Hynix's results crystallize the tension. Revenue of 79.32 trillion won came in below the 84 trillion won expected; operating profit of 60.54 trillion won missed the 64 trillion won estimate. ◆ When a company posts 557% profit growth and the stock falls more than 10%, the market is signaling that the AI demand curve, however steep, may already be fully priced.
What's next
Four Mag 7 companies report earnings over the next day or so. Apple reports Thursday. ◆ Those results will test whether the capital-light AI thesis that propelled Apple to $5 trillion holds under scrutiny — and whether the hyperscalers' spending plans reassure or further alarm a market already rotating away from the infrastructure layer.